Chapter 3: 11DQ (page 247)
Briefly discuss three types of lender control used in inventory financing.
The three types of lender controls are blanket inventory, trust receipt and warehousing.
Over 30 million students worldwide already upgrade their learning with Vaia!
All the tools & learning materials you need for study success - in one app.
Get started for free
Explain how rapidly expanding sales can drain the cash resources of a firm.
Neon Light Company of Kansas City ships lamps and lighting appliances throughout the country. Ms. Neon has determined that through the establishment of local collection centers around the country, she can speed up the collection of payments by three days. Furthermore, the cash management department of her bank has indicated to her that she can defer her payments on her accounts by one-half day without affecting suppliers. The bank has a remote disbursement center in Florida.
a. If Neon Light Company has \(2.25 million per day in collections and \)1.05 million per day in disbursements, how many dollars will the cash management system free up?
b. If Neon Light Company can earn 6 percent per annum on freed-up funds, how much will the income be?
c. If the total cost of the new system is $400,000, should it be implemented?
What is an asset-backed public offering?
Route Canal Shipping Company has the following schedule for aging of accounts receivable:
c. If the firm likes to see its bills collected in 35 days, should it be satisfied with the average collection period?
Bambino Sporting Goods makes baseball gloves that are very popular in the spring and early summer season. Units sold are anticipated as follows:
March | 3,250 |
April | 7,250 |
May | 11,500 |
June | 9,500 |
Total units | 31,500 |
If seasonal production is used, it is assumed that inventory will directly match sales for each month and there will be no inventory build-up. The production manager thinks the preceding assumption is too optimistic and decides to go with level production to avoid being out of merchandise. He will produce the 31,500 units over four months at a level of 7,875 per month.
a. What is the ending inventory at the end of each month? Compare the unit sales to the units produced and keep a running total.
b. If the inventory costs $12 per unit and will be financed at the bank at a cost of 12 percent, what is the monthly financing cost and the total for the four months? (Use 0.01 as the monthly rate.)
What do you think about this solution?
We value your feedback to improve our textbook solutions.
