Reference no: EM132432809
1) You have $1,700 on deposit with no outstanding checks or uncleared deposits. One day you make a check for $450. Does this make a disbursement float or collection float? What is your available balance? What is your book balance?
2) You place an order for 500 bicycles at a unit price of $250. The supplier offers terms of 1/15, net 35.
a) How long do you have to pay before the account is overdue? If you take the full period, how much should you remit?
b) What is the discount being offered? How quickly must you pay to get the discount? If you do take the discount, how much should you remit?
c) If you don't take the discount, how much interest are you paying implicitly? How many days credit are you receiving?
3) Bob's Auto Supply has weekly credit sales of $35,000 and average collection period of 37 days. What is Bob's average account receivable figure?
4) Arnold Barker is considering extending credit to a group of new customers. The new customers will generate an average of $35,000 per day in new sales. On average, they will pay in 30 days. The variable cost ratio is 80% and the default rate is 10% of sales. If the cost of capital is 12%, what is the NPV of one day's sales if Arnold grants credit.
5) Describe each of the following:
a) Sight Draft
b) Time Draft
c) Banker's Acceptance
d) Promissory Note
e) Trade Acceptance
6) List two ratios and one report schedule used to monitor accounts receivables.
7) Suppose you are out of money in your checking account; however, your local grocery store will cash a check for you. So you cash a check for $200. Of course, this check will bounce unless you do something. To prevent this , you go to the store again the next day and cash another check for $200 and deposit it into your account before the first check clears. You repeat this process every day until payday, when you have $800 deposited by your employer. Assuming no checks bounce and ignoring any question of legality, is there anything unethical about this? If you say yes, then why? Who is harmed?
8) What are the benefits of a cash concentration system?