A firm that makes 90 of its sales on credit and 10 for cash

Reference no: EM13394927

1.Which of the following:statements is CORRECT?

a.A firm that makes 90% of its sales on credit and 10% for cash is growing at a constant rate of 10% annually. Such a firm willbe able to keep its accounts receivable at the current level, since the 10%cash sales can be used to finance the 10% growth rate.

b.In managing a firm'saccounts receivable, it is possible to increase credit sales per day yet stillkeep accounts receivable fairly steady, provided the firm can shorten thelength of its collection period sufficiently.

c.Because of the costs of granting credit, it is not possible for credit sales to be more profitable thancash sales.

d.Receivables and payables both result from sales transactions, a firm witha high receivables-to-sales ratio must also have a high payables-to-salesratio.

e.Other things held constant,if a firm can shorten its DSO, this will lead to a higher current ratio.

2.Halka Company is a no-growthfirm. Its sales fluctuate seasonally, causing total assets to vary from$320,000 to $410,000, but fixed assets remain constant at $260,000. If the firmfollows a maturity matching working capital financing policy,what is the most likely total of long-term debt plus equity capital?

a. $260,642
b. $274,360
c. $288,800
d. $304,000
e.$320,000

3.Your consulting firm wasrecently hired to improve the performance of Shin-Soenen Inc, which is highlyprofitable but has been experiencing cash shortages due to its high growthrate. As one part of your analysis, you want to determine the firm’s cash conversion cycle. Using the following information and a 365-day year,what is the firm’s present cash conversion cycle?

Average inventory = $75,000 .
Annual sales = $600,000 .
Annual cost of goods sold = $360,000 .
Average accounts receivable =$160,000 .
Average accounts payable = $25,000 .

1. 120.6 .
2. 126.9 .
3. 133.6 .
4. 140.6 .
5. 148.0

4.AffleckInc.'s business is booming, and it needs to raise more capital. The companypurchases supplies on terms of 1/10 net 20, and it currently takes the discount.One way of getting the needed funds would be to forgo the discount, and thefirm's owner believes she could delay payment to 40 days without adverseeffects. What would be the effective annual percentage cost of funds raised bythis action?

a.10.59
b.11.15
c.11.74
d.12.36
e.13.01

Reference no: EM13394927

Questions Cloud

The method of evaluating financial data which change under : the method of evaluating financial data that change under different courses of action is calleda. financial statement

Review the different product categories in each of the : 1. how would you describe its product line breadth?2. review the different product categories in each of the

A company is employing the high-low method and has : a company is using the high-low method and has determined the following production for the months of january february

Explain the suiatble elasticity concept then calculate : for each of the following events state the relevant elasticity concept. then compute the measure of elasticity

A firm that makes 90 of its sales on credit and 10 for cash : 1.which of the followingstatements is correct?a.a firm that makes 90 of its sales on credit and 10 for cash is growing

Conan companys monthly activity level ranged from a low of : conan companys monthly activity level ranged from a low of 17000 units in may to a high of 26000 units in october.

Based on all the chapters in the course text choose an : based on all the chapters in the course text choose an advertising topic for the final paper from the suggested list

If the purchasing department makes 140260 copies this year : tylers consulting company has purchased a new 15000 copier. this overhead cost will be shared by the purchasing

The tobias company consists of 12 obsolete computers which : the tobias company has 12 obsolete computers that are carried in inventory at a cost of 13200. if these computers are

User Account

All Pages