During Its Only Year of Operation,a Firm Collected $175,000 in Revenue

question 181

Multiple Choice

During its only year of operation,a firm collected $175,000 in revenue and spent $50,000 on raw materials,labor,and utilities.The owners of the firm spent $100,000 of their own money to build the firm's factory (instead of buying bonds and earning a 10% annual rate of return) ,which they sold at the end of the year for $100,000.The firm's economic profit is:

• A)$35,000.
• B)$125,000.
• C)$115,000.
• D)$25,000.

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Definitions:

Average Collection Period

The expected time a business collects payments from its customers for goods or services it has sold on credit terms.

Average Investment

The mean amount invested in certain assets or projects over a specific time period, aiming to gauge investment activity.

Net Working Capital

The gap between what a business owns in short-term assets versus what it owes in short-term liabilities.

Net Fixed Assets

The value of a company’s property, plant, and equipment (PP&E) minus its accumulated depreciation, indicating the net book value of its fixed assets.