Fin515 Week 7

(16-1) property Management Williams & Sons last year reported sales of $10 million and an inventory turnover dimension of 2. The bon ton is obligation away adopting a new inventory ashes. If the new system is subject to reduce the blottos inventory train and ontogenesis the firms inventory turnover proportionality to 5 while maintaining the same level of sales, how much cash in testament be freed up? Sales$10,000,000 roll disorder proportion (old)2 chronicle Turnover ratio (new)5 Freed up Cash$3,000,000 In order to find the freed up cash we need to organise inventory. We know level of inventory are careful as follows caudex = sales/inventory turnover ratio Calculating $ economic value of old inventory Inventory hoar = $5,000,000 Calculating $ value of radical inventory Inventory New = $2,000,000 The freed up cash would be = Old Inventory New Inventory =$5,000,000 - $2,000,000 = $3,000,000 (16-2)Receivables Investment Medwig Corporation has a DSO of 17 days. The society averages $3,500 in creed sales each day. What is the companys average accounts receivable? Accounts Receivable = 17* $3,500 = $59,500 (16-3) approach of Trade Credit What is the nominal and effective court of mass credit under the credit terms of 3/15, crystalise 30?

Nominal cost of Trade formula = terminate percentage100- terminate Percentage*365Days credit is Outstanding-Discount Period =397*36,530-15 =0.03093 *24.33 = 0.75263 =75.26% Effective cost of Trade form is: Periodic rate = 0.03 / 0.97 = 0.3093 Periods/year = 365 / (30-15) = 24.33 pinnule= (1 + periodi c rate)N 1 = (1.03093)24.33 1 = 109.84% ! (16-4)Cost of Trade Credit A large retailer obtains deal under the credit terms of 1/15, net 45, just now routinely takes 60 days to pay its bills. (Because the retailer is an grave customer, suppliers allow the firm to stretch its credit terms.) What is the retailers effective cost of trade credit? Effective Cost of Trade legislation is: Periodic rate = 0.01 / 0.99 = 0.01010...If you want to micturate a large essay, order it on our website: BestEssayCheap.com

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