Reference no: EM132531922

Question 1) Morning Star has credit sales of $1,032,800, costs of goods sold of $662,350, average accounts receivable of $86,300, and average accounts payable of $92,600. On average, how long does it take Morning Star's credit customers to pay for their purchases?

Question 2) Bradley's has an inventory turnover rate of 7.6, a payables turnover rate of 11.4, and a receivables turnover rate of 12.6. How long is the operating cycle?

Question 3) West Chester Automation has an inventory turnover of 9.1 and an accounts payable turnover of 10.6. The accounts receivable period is 32.8 days. What is the length of the cash cycle?

Question 4) Fancy Footwear has a line of credit with a local bank in the amount of $175,000. The loan agreement calls for annual interest of 6.8 percent with a compensating balance of 3 percent of the total amount borrowed. The compensating balance will be deposited into an interest-free account. What is the effective interest rate on the loan if the firm needs $125,000 to cover expenses for one year?

Question 5) The Corner Store factors all of its receivables immediately at a discount rate of 1.1 percent. The average collection period is 37.4 days and default is unlikely. What is the effective cost of borrowing?