If You Invest $5,000 at the End of Every Year

question 184

Multiple Choice

If you invest $5,000 at the end of every year for nine years at an interest rate of 6%,the balance of your investment in 5 years will be closest to

• A)$6,690.
• B)$28,185.
• C)$21,060.
• D)$25,000.

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Definitions:

Average Collection Period (ACP)

A financial ratio that measures how long it takes to collect on credit sales. Also called days sales outstanding (DSO).

Credit Policy

A set of guidelines that a company follows to determine credit terms for customers, which encompass payment period, amount of credit, and the discount terms.

Cash Discount

A reduced price offered by a seller for goods or services if the buyer pays in cash, or within a specified time period, encouraging early payment.

Receivables

Money that is owed to a company by its customers for goods or services provided on credit, represented as assets on the balance sheet.