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: 78%
78% is too high and would suggest including some of the 31-60 day receivables in the current category, which is incorrect
Option C: 72%
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
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