Chapter 3: Q10BP (page 221)
Mervyn’s Fine Fashions has an average collection period of 50 days. The accounts receivable balance is $95,000. What is the value of its credit sales?
Short Answer
The value of credit sales is $684,000.
Chapter 3: Q10BP (page 221)
Mervyn’s Fine Fashions has an average collection period of 50 days. The accounts receivable balance is $95,000. What is the value of its credit sales?
The value of credit sales is $684,000.
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Get started for freeBoatler Used Cadillac Co. requires $850,000 in financing over the next two years. The firm can borrow the funds for two years at 12 percent interest per year. Mr. Boatler decides to do forecasting and predicts that if he utilizes short term financing instead, he will pay 7.75 percent interest in the first year and 13.55 percent interest in the second year. Determine the total two-year interest cost under each plan. Which plan is less costly?
Guardian Inc. is trying to develop an asset financing plan. The firm has \(400,000 in temporary current assets and \)300,000 in permanent current assets. Guardian also has $500,000 in fixed assets. Assume a tax rate of 40 percent.
a. Construct two alternative financing plans for Guardian. One of the plans should be conservative, with 75 percent of assets financed by long-term sources, and the other should be aggressive, with only 56.25 percent of assets financed by long-term sources. The current interest rate is 15 percent on long-term funds and 10 percent on short-term financing.
Tobin Supplies Company expects sales next year to be \(500,000. Inventory and accounts receivable will increase \)90,000 to accommodate this sales level. The company has a steady profit margin of 12 percent with a 40 percent dividend pay-out. How much external financing will Tobin Supplies Company have to seek? Assume there is no increase in liabilities other than that which will occur with the external financing.
What is the difference between pledging accounts receivable and factoring accounts receivable?
Route Canal Shipping Company has the following schedule for aging of accounts receivable:
a. Fill in column (4) for each month.
Age of receivables April 30 20X1 | |||
1 | 2 | 3 | 4 |
Month of sales | Age of accounts | Amounts | Percent of amount due |
April | 0-30 | \(131,250 | ____ |
March | 31-60 | \)93,750 | ____ |
February | 61-90 | \(112,500 | ____ |
January | 91-120 | \)37,500 | ____ |
Total receivables | $375,000 | 100% |
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