A general contractor has accounts receivable of $125,000 with the following aging: 0-30 days ($85,000), 31-60 days ($25,000), 61-90 days ($10,000), and over 90 days ($5,000). What percentage of total receivables is considered current (0-30 days)?
Correct Answer
A) 68%
Current receivables are $85,000 ÷ $125,000 total = 0.68 or 68%. This calculation helps contractors assess collection risk and cash flow timing.
Why This Is the Correct Answer
To find the percentage of current receivables, we divide the current receivables (0-30 days) by the total receivables and multiply by 100. The current receivables are $85,000 out of total receivables of $125,000. This gives us $85,000 ÷ $125,000 = 0.68 = 68%. This percentage is crucial for contractors to understand their immediate cash flow expectations and collection risk assessment.
Why the Other Options Are Wrong
Option B: 72%
72% would result from an incorrect calculation, possibly confusing the aging categories or making an arithmetic error in the division
Option C: 78%
78% is too high and would suggest including some of the 31-60 day receivables in the current category, which is incorrect
Option D: 82%
82% is significantly too high and would indicate a major calculation error, possibly including multiple aging categories as 'current'
Memory Technique
Remember 'Current over Total' - always divide the current amount by the total amount to get the percentage of current receivables
Reference Hint
Business and Finance chapter covering accounts receivable management and aging analysis
More Business & Finance Questions
A contractor's license expires on March 31st. If they submit a renewal application on April 15th, what additional requirement must be met under Florida regulations?
A general contractor purchases equipment worth $45,000 with a useful life of 9 years and no salvage value. Using straight-line depreciation, what is the annual depreciation expense?
In Florida, what is the minimum workers' compensation insurance coverage required for construction companies with employees?
What is the typical recommended coverage amount for general liability insurance for a small to medium-sized general contracting business?
A contractor estimates startup costs of $75,000 for equipment, $25,000 for initial inventory, $15,000 for insurance premiums, and $10,000 for working capital. They can finance 70% of the total. How much cash do they need?
People Also Study
Previous Question
Your company has 12 employees and wants to establish an employee handbook. Which federal employment laws would apply to your company?
Next Question
A construction company projects the following cash flows for the next quarter: Month 1: -$25,000, Month 2: +$15,000, Month 3: +$35,000. Starting with a cash balance of $40,000, what is the projected ending cash balance?