A firm has just ended the calendar year making a sale in the amount of $200,000 of merchandise purchased during the year at a total cost of $150,500. Although the firm paid in full for the merchandise during the year, it has yet to collect at year end from the customer. One possible problem this firm may face is ________.

Question

Quizplus · Accepted Answer

The firm may face insolvency because it has expended resources (cash) to purchase merchandise but has not yet collected the sales revenue, potentially affecting its ability to meet short-term liabilities.

A Firm Has Just Ended the Calendar Year Making a Sale