Fin515 - Week 7 Assignment

16-1 Cash Management
Williams & Sons last year reported sales of $10 million and an inventory upset ratio of 2. The society is flat adopting a new inventory system. If the new system is subject to reduce the firms inventory level and accession the firms inventory dollar volume ratio to 5 while maintaining the same level of sales, how much cash leave be freed up?

Sales = $10 million, Inventory turnover ratio = 2 and 5

Inventory = Sales/Inventory turnover ratio

$10,000,000/2 = $5,000,000

$10,000,000/5 = $2,000,000

$5,000,000 - $2,000,000 = $3,000,000



16-2 Receivables Investment
Medwig Corporation has a DSO of 17 age. The company averages $3,500 in book of facts sales each day. What is the companys average accounts receivable?

Credit sales = $3,500, Collection compass point = 17 days

Accounts receivable (AR) = Credit Sales per day*duration of collection period

AR = $3,500*17 = $59,500



16-3 Cost of Trade Credit
What is the noun phrase and effective monetary value of slew realization under the credit toll of 3/15, net 30?

Nominal cost of trade credit (rNOM)= Discount percentage/(100 Discount percentage)*365/(Days credit is outstanding Discount period)

rNOM = 3/(100 3)*365/(30-15) = 3/97*365/15 = .0309*24.33 = .7518 or 75.18%

rNOM = 75.



18%

stiff cost of trade = [(1 + periodic rate) periods per year] 1.0

efficacious annual rate (EAR) = [(1+ .0309) 24.33] - 1.0 = 2.0968 1.0 = 1.0968 = 109.68%

EAR = 109.68%



16-4 Cost of Trade Credit
A large retailer obtains merchandise under the credit terms of 1/15, net 45, but routinely takes 60 days to pay its bills. (Because the retailer is an important customer, suppliers allow the firm to adulterate its credit terms.) What is the retailers effective cost of trade credit?

Periods per year = 365/(Days allowed Discount period)

Periods per year = 365/(60-15) = 365/45 = 8.11

Effective annual rate (EAR) = [(1+ 1/99) 8.11] - 1.0 = 1.0849 - 1.0 = .0849 or 8.49%

EAR = 8.49%...If you lack to get a full essay, order it on our website: Orderessay



If you want to get a full essay, wisit our page: write my essay .