Question

1.  Inventory Management

Williams & Sons last year reported sales of $145 million, cost of goods sold (COGS) of $120 and an inventory turnover ratio of 5. The company is now adopting a new inventory system. If the new system is able to reduce the firm's inventory level and increase the firm's inventory turnover ratio to 8 while maintaining the same level of sales and COGS, how much cash will be freed up? Do not round intermediate calculations. Round your answer to the nearest dollar.

ANSWER: $  

2. Receivables Investment

Medwig Corporation has a DSO of 37 days. The company averages $4,250 in sales each day (all customers take credit). What is the company's average accounts receivable? Round your answer to the nearest dollar.

ANSWER: $

3. Cost of Trade Credit

What are the nominal and effective costs of trade credit under the credit terms of 1/20, net 30? Assume 365 days in a year for your calculations. Round your answers to two decimal places. Do not round intermediate calculations.

ANSWER: (percentages)

Nominal cost of trade credit:

Effective cost of trade credit:

4. Cost of Trade Credit

A large retailer obtains merchandise under the credit terms of 3/20, net 30, but routinely takes 65 days to pay its bills. (Because the retailer is an important customer, suppliers allow the firm to stretch its credit terms.) What is the retailer's effective cost of trade credit? Assume 365 days in year for your calculations. Do not round intermediate calculations. Round your answer to two decimal places.

ANSWER: (percentage)

5. Accounts Payable

A chain of appliance stores, APP Corporation, purchases inventory with a net price of $250,000 each day. The company purchases the inventory under the credit terms of 2/15, net 40. APP always takes the discount, but takes the full 15 days to pay its bills. What is the average accounts payable for APP? Round your answer to the nearest dollar.

ANSWER: $

Answer 1