Question

Accounts receivable in an existing business:

A) are rarely worth their face value.

B) unlike inventory, are often worth their face value.

C) appreciate over time due to interest and penalties.

D) are not a significant consideration when buying anexisting business

Answer 1

Answer:

The correct answer is letter "A": are rarely worth their face value.

Explanation:

Accounts receivables are notes issued to customers after selling them a product or rendering services on credit. The repayment term may vary from 30, 60 or 90 days. If an account receivable is not paid after that period it could be considered as an uncollectible account which implies the company will incur losses.

Accounts receivable are hardly ever accepted at face value (real value of the moment of the purchase) because companies add the interest rate that is to be charged for the sale on the account.