Reference no: EM132557364
1) Williams & Sons last year reported sales of $36 million, cost of goods sold (COGS) of $28 million, and an inventory turnover ratio of 4. The company is now adopting a new inventory system. If the new system is able to reduce the firm's inventory level and increase the firm's inventory turnover ratio to 7 while maintaining the same level of sales and COGS, how much cash will be freed up? Do not round intermediate calculations. Enter your answer in dollars. For example, an answer of $1.23 million should be entered as 1,230,000,000. Round your answer to the nearest dollar.
2)Medwig Corporation has a DSO of 32 days. The company averages $4,000 in sales each day (all customers take credit). What is the company's average accounts receivable? Assume a 365-day year. Round your answer to the nearest dollar.
3)What are the nominal and effective costs of trade credit under the credit terms of 1/10, net 40? Assume a 365-day year. Do not round intermediate calculations. Round your answers to two decimal places.
Nominal cost of trade credit:
Effective cost of trade credit:
4)A large retailer obtains merchandise under the credit terms of 1/10, net 40, but routinely takes 65 days to pay its bills. (Because the retailer is an important customer, suppliers allow the firm to stretch its credit terms.) What is the retailer's effective cost of trade credit? Assume a 365-day year. Do not round intermediate calculations. Round your answer to two decimal places.
5)A chain of appliance stores, APP Corporation, purchases inventory with a net price of $500,000 each day. The company purchases the inventory under the credit terms of 1/15, net 30. APP always takes the discount but takes the full 15 days to pay its bills. What is the average accounts payable for APP? Round your answer to the nearest dollar.
6) Snider Industries sells on terms of 2/10, net 25. Total sales for the year are $1,000,000. Thirty percent of customers pay on the 10th day and take discounts; the other 70% pay, on average, 30 days after their purchases. Assume a 365-day year.
A)What is the days sales outstanding? Do not round intermediate calculations. Round your answer to the nearest whole number.
B)What is the average amount of receivables? Do not round intermediate calculations. Round your answer to the nearest dollar.
C) What would happen to average receivables if Snider toughened its collection policy with the result that all nondiscount customers paid on the 25th day? Do not round intermediate calculations. Round your answer to the nearest dollar.
7)Calculate the nominal annual cost of trade credit under each of the following terms. Assume a 365-day year. Do not round intermediate calculations. Round your answers to two decimal places.
-1/15, net 20. =
-2/10, net 60. =
-3/10, net 55. =
-2/10, net 55. =
-2/15, net 35. =