The incremental investment in receivables under the accounts receivable approach is equal to:
A) P − νQ'.
B) PQ'.
C) PQ + ν(Q' − Q).
D) P(Q' − Q).
E) PQ(Q' − Q).

Question

Quizplus · Accepted Answer

The incremental investment in receivables is the difference between the investment in receivables at the new credit policy (Q') and the investment in receivables at the old credit policy (Q), which is ν(Q' - Q). The investment in receivables at the new credit policy is PQ, so the incremental investment is PQ + ν(Q' - Q). Therefore, the correct choice is C.

The Incremental Investment in Receivables Under the Accounts Receivable Approach