Reference no: EM13706131

Mervyn's Fine Fashions has an average colletction period of 50 dyas. The accounts receivable balance is $95,000. What is the value of it's credit sales?

Dome Metals has credit sales of $180,000yearly with credit terms of net 60 days, which is also the average collection period. Dome does not offer a discount for early payment, so it's customers take the full 60 days to pay. What is the average receivables balance? Receivables turnover?

Compute the cost of not taking tthe following cash discounts.
b) 2/15, net 30
c) 2/10, net 45

Your bank will lend you $4,000 for 45 days at a cost of $50 interest. What is your effective rate of interest?

Mary Ott is going to borrow $5,000 for one year at 13 percent interest. What is the effective rate of interest if the loan is discounted?

McGriff Dog Food Company normally takes 27 days to pay for average daily credit purchases of $9,530. It's average daily sales are $10,680, and it collects accounts in 32 days.
a) What is it's net credit position? That is, compute it's accounts receivable and accounts payable and subtract the latter from the former.

accounts receivable= average daily credit sales x average collection period
accounts payable= average daily credit purchases x average payment period

b) If the firm extends its average payment period from 27 days to 37 days (and all else remains the same), what is the firms new net credit position? Has it imporved it's cash flow?

Maxim Air Filters Inc. plans to borrow $300,000 for one year. Northeast National Bank will lend the money at 10% interest and requires a compensating balance at 20%. What is the effective rate of interest?

Randell Corporation plans to borrow $233,000 for one year at 20% from the Waco State Bank. There is a 21% compensating balance requirement. Randall Corporation keeps minimum transaction balances of $17,500 in the normal course of business. This idle cash counts toward meeting the compensating balance requirement. What is the effective rate of interest?

Lewis and Clark Camping Supplies Inc. is borrowing $51,000 from Western State Bank. The total interest is $15,700. The loan will be paid by making equal monthly payment for the next three years. What is the effective rate of interest on this installment loan?

The Reynolds Corporation buys from its suppliers on terms on 3/17, net 45. Reynolds has not been utilizing the discounts offered and has been taking 45 days to pay its bills. Mr. Duke, Reynolds Corporation vice president, has suggested that the company begin to take it's discounts offered. Duke proposes that the company borrow from it's bank at a stated rate of 16%. The ban requires a 27% compensating balance on these loans. Current account balances would not be available to meet any of this compensating balance requirement. Do you agree with Duke's proposal?