Reference no: EM131135931
Group Problem Set
The group problem set challenge consists of 4 compulsory questions which must be completed and uploaded in one (1) MS Word file by the stipulated dates on the course page. Please show your working and present your answers on the numbered sequence in as clear a manner as possible.
Questions 1
Your firm has an average receipt size of $108. A bank has approached you concerning a lockbox service that will decrease your collection time by two days. You typically receive 8,500 cheques per day. Daily interest rate is .016%. If the bank charges a fee of $225 per day, should the lockbox project be accepted. What would net annual savings be if the service was adopted?
Question 2
Shark and Bake Corporation had an average daily cash balance of $1,300. Total cash needed for the year is $43,000. The interest rate is 5% and replenishing the cash costs $8 each time. What do you think of Shark and Bake Corporation strategy?
Question 3
Here are some important figures from the budget of Nashville Nougats, Inc., for the second quarter of 2009:
The Company predicts that 3 percent of its credit sales will never be collected, 36 percent of its sales will be collected in the month of sale, and the remaining 61 percent will be collected in the following month. Credit purchases will be paid in the month following the purchase.
In March 2009, credit sales were $302,400, and credit purchases were $224,640. The April 1 cash balance was $403,200. What is the cash balance at the end of May?
Question 4
You own a small business that produces high quality cut flowers. While you have many customers your largest buyer is Blooming Smart Ltd, a large retail outfit with a national chain of outlets that accounts for 50% of your orders on average. Blooming Smart Ltd has now requested that you extend credit terms to them better than what you offer to your other buyers.
A. How could this affect your operating cycle?
B. Do you see anything ethically wrong with what Blooming Smart is trying to do?
C. What would be your strategy(ies) in dealing with this?
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