Chapter 3: Q7DQ (page 219)
What are three quantitative measures that can be applied to the collection policy of the firm?
The average collection period, bad debt to sales ratio, and accounts receivables aging are applied to the collection policy.
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
In Problem 12, assume the term structure of interest rates becomes inverted, with short-term rates going to 11 percent and long-term rates 5 percentage points lower than short-term rates. If all other factors in the problem remain unchanged, what will earnings after taxes be?
How is a cash budget used to help manage current assets?
Esquire Products Inc. expects the following monthly sales:
January | \(28,000 |
February | \)19,000 |
March | \(12,000 |
April | \)14,000 |
May | \(8,000 |
June | \)6,000 |
July | \(22,000 |
August | \)26,000 |
September | \(29,000 |
October | \)34,000 |
November | \(42,000 |
December | \)24,000 |
Total annual sales | \(264,000 |
Cash sales are 40 percent in a given month, with the remainder going into accounts receivable. All receivables are collected in the month following the sale. Esquire sells all of its goods for \)2 each and produces them for \(1 each. Esquire uses level production, and average monthly production is equal to annual production divided by 12.
e. Determine total current assets for each month. Include cash, accounts receivable, and inventory. Accounts receivable equal sales minus 40 percent of sales for a given month. Inventory is equal to ending inventory (part a) times the cost of \)1 per unit.
Fisk Corporation is trying to improve its inventory control system and has installed an online computer at its retail stores. Fisk anticipates sales of 49,000 units per year, an ordering cost of \(8 per order, and carrying costs of \)1.60 per unit.
b. How many orders will be placed during the year?
Commercial paper may show up on corporate balance sheets as either a current asset or a current liability. Explain this statement.
What do you think about this solution?
We value your feedback to improve our textbook solutions.
