Dilom Farm Supply Is Located in a Small Town in the Rural

question 116

Multiple Choice

Dilom Farm Supply is located in a small town in the rural west. Data regarding the store's operations follow:
Sales are budgeted at $260,000 for November, $230,000 for December, and $210,000 for January.
Collections are expected to be 55% in the month of sale, 40% in the month following the sale, and 5% uncollectible.
The cost of goods sold is 80% of sales.
The company purchases 50% of its merchandise in the month prior to the month of sale and 50% in the month of sale. Payment for merchandise is made in the month following the purchase.
Other monthly expenses to be paid in cash are $21,700.
Monthly depreciation is $17,000.
Ignore taxes.
-The net income (loss) for December would be:

• A) $24,300
• B) $12,800
• C) ($4,200)
• D) $7,300

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Definitions:

Rate of Return

The gain or loss on an investment over a specified period, expressed as a percentage of the investment’s cost.

Earnings Multiple

A financial metric used to evaluate the relative value of a company, determined by dividing the company's stock price by its earnings per share.

Risk Differences

The variations in risk between investments, often considered in the context of portfolio management and investment analysis.

Maturity

The point in time when the principal amount of a financial instrument becomes due and is to be paid.