Jonathan Values Word at $100 and Excel at $90, and Ashley

question 197

Multiple Choice

Jonathan values Word at $100 and Excel at $90, and Ashley values Word at $80 and Excel at $60. Why does bundling fail to raise the seller's profits in this case?

• A) Jonathan's and Ashley's values for Word and Excel are negatively correlated.
• B) Jonathan's and Ashley's values for Word and Excel are positively correlated.
• C) Word and Excel don't work well with each other.
• D) Word and Excel are valued highly even when bought separately.

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Definitions:

Cash Cycle

The time period it takes for a company to convert its investments in inventory back into cash, through sales.

Accounts Receivable Period

The typical duration in days that a company requires to receive payments from its sales made on credit.

Restrictive Short-Term Financial Policy

A financial strategy that prioritizes maintaining a lower level of current assets relative to liabilities, often to maximize profitability at the expense of liquidity.

Marketable Securities

Financial instruments that can be quickly converted into cash, such as stocks, bonds, or treasury bills, with minimal loss of value.