Reference no: EM131157514

Problem 1:
Cash conversion cycle: Wolfgang's Masonry estimates that it takes the company 27 days on average to pay off its suppliers. It also knows that it has days' sales in inventory of 64 days and days' sales outstanding of 32 days. How does Wolfgang's cash conversion cycle compare with the industry average of 75 days?

Problem 2:
Cash conversion cycle: Northern Manufacturing Company found that during the last year, it took an average of 47 days to pay its suppliers, while it took 63 days to collect its receivables.The company's days' sales in inventory was 49 days. What is Northern's cash conversion cycle?

Problem 3:
Cash conversion cycle: Devon Automotive estimates that it takes the company about 62 days to collect cash from customers on finished goods from the day it receives raw materials, and it takes about 65 days to pay its suppliers.What is the company's cash conversion cycle? Interpret your answer.

Problem 4:
Operating cycle: Lilly Bakery distributes its products to more than 75 restaurants and delis. The company's average collection period is 27 days, and it keeps its inventory for an average of four days. What is Lilly's operating cycle?

Problem 5:
Operating cycle: NetSpeed Technologies is a telecom component manufacturer. The firm typically has a collection period of 44 days and days' sales in inventory of 29 days. What is the operating cycle for NetSpeed?

Problem 6:
Cost of trade credit: Sybex Corp. sells its goods with terms of 2/10 EOM, net 30.What is the implicit cost of the trade credit?

Problem 7:
Cost of trade credit: Mill Street Corporation sells its goods with terms of 4/10 EOM, net 60.What is the implicit cost of the trade credit?

Problem 8:
Lockbox: Rosenthal Design has daily sales of $59,000. The financial management team determined that a lockbox would reduce the collection time by 1.6 days. Assuming the company can earn 5.2 percent interest per year, what are the savings from the lockbox?

Problem 9:
Lockbox: Pacific Traders has annual sales of $1,895,000. The firm's financial manager has determined that using a lockbox will reduce collection time by 2.3 days. If the firm's opportunity cost on savings is 5.25 percent, what are the savings from using the lockbox?

Problem 10:
Effective interest rate: The Kellogg Bank requires borrowers to keep an 8 percent compensating balance. Gorman Jewels borrows $340,000 at a 7 percent stated APR. What is the effective interest rate on the loan?

Problem 11:
Effective interest rate: Morgan Contractors borrowed $1.75 million at an APR of 10.2 percent. The loan called for a compensating balance of 12 percent. What is the effective interest rate on the loan?

Problem 12:
Factoring: Maltz Landscaping has an average collection period of 38 days for its accounts receivable. Currently, maltz factors all of its receivables at a 2.04 percent discount. What is the effective annual interest rate on the financing from the factor?

Problem 13:
Formal line of credit:Winegartner Cosmetics is setting up a line of credit at its bank for $5 million for up to two years.The loan rate is 5.875 percent and the loan agreement calls for an annual fee of 40 basis points on any unused balance for the year. If the firm borrows $2 million on the day the loan agreementis signed, what is the effective rate for the line of credit?

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