A Firm Has Just Ended the Calendar Year Making a Sale

question 112

Multiple Choice

A firm has just ended the calendar year making a sale in the amount of $200,000 of merchandise purchased during the year at a total cost of $150,500. Although the firm paid in full for the merchandise during the year, it has yet to collect at year end from the customer. One possible problem this firm may face is ________.

• A) low profitability
• B) insolvency
• C) inability to receive credit
• D) high leverage

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Definitions:

Stradivarius

A type of high-quality stringed instrument made by members of the Stradivari family, particularly renowned violins.

Bailor

The party in a bailment who temporarily transfers possession but not ownership of a property to another party, the bailee.

Leasehold

An interest in a property that allows the holder (lessee) to use and occupy the land or premises for a specified period, under certain conditions, but does not provide ownership.

Life Estates

A legal right to use and benefit from a property for the duration of an individual's lifetime.