At the End of June 2007,TB Cave & Associates Had

question 29

Multiple Choice

At the end of June 2007,TB Cave & Associates had an average of $45 000 in accounts receivable.Credit sales were $292 500.The company factors all of its receivables immediately at a 1.50% discount.For simplification,consider that all of the accounts receivable are expected to be collected in full.What is the company's effective cost of borrowing on this source of financing?

• A)13.48%
• B)11.34%
• C)12.56%
• D)12.01%
• E)10.32%

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Definitions:

Declaration Date

The Declaration Date is the date on which a company's board of directors announces its next dividend payment, specifying the dividend's size, ex-dividend date, and payment date.

Dividend

A portion of a company's earnings that is paid to shareholders, usually on a quarterly basis, as a reward for owning the stock.

Liability

A company's financial debt or obligations that arise during the course of its business operations, required to be settled over time.

Stock Split

A corporate action that increases the number of shares in a company, leading to a decrease in the price per share while keeping the market capitalization the same.