Assume that the firms profit margin is 25 percent. How much of the receivables balance must be

Question:

Assume that the firm’s profit margin is 25 percent. How much of the receivables balance must be financed? What would the firm’s balance sheet figures for accounts receivable, notes payable and retained earnings be at the end of one year if notes payable are used to finance the investment in receivables? Assume that the cost of carrying receivables had been deducted when the 25 percent profit margin was calculated.

Balance Sheet
Balance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial...