Dimon Products' sales are expected to be $5 million this year, with 90% on credit and 10% for cash.Sales are expected to grow at a stable, steady rate of 10% annually in the future.Dimon's accounts receivable balance will remain constant at the current level, because the 10% cash sales can be used to support the 10% growth rate, other things held constant.

Question

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The accounts receivable balance is likely to increase because the 10% cash sales only cover the growth in total sales, not the specific increase in credit sales, which constitute 90% of total sales and are the primary contributor to accounts receivable.

Dimon Products' Sales Are Expected to Be $5 Million This