TWT100412_Romy Snyder_1
1. Williams & Sons last year reported sales of $17 million and an inventory turnover ratio of 3.3. 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 7.7 while maintaining the same level of sales, how much cash will be freed up? Round your answer to the nearest dollar. $ _________ 2. Medwig Corporation has a DSO of 33 days. The company averages $4,250 in credit sales each day.
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1. Williams & Sons last year reported sales of $17 million and an inventory turnover ratio of 3.3. 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 7.7 while maintaining the same level of sales, how much cash will be freed up? Round your answer to the nearest dollar. $ _________ 2. Medwig Corporation has a DSO of 33 days. The company averages $4,250 in credit sales each day. What is the company’s average accounts receivable? Round your answer to the nearest dollar $ ________ 3. What is the nominal and effective cost of trade credit under the credit terms of 3/10, net 30? Assume 365 days in a year for your calculations. Round your answers to two decimal places. _______ % _______ % 4. A large retailer obtains merchandise under the credit terms of 1/15, net 35, but routinely takes 70 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. Round your answer to two decimal places. _____ % 5. A chain of appliance stores, APP Corporation, purchases inventory with a net price of $600,000 each day. The company purchases the inventory under the credit terms of 2/15, net 35. 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. $ ______ 6. McDowell Industries sells on terms of 3/10, net 30. Total sales for the year are $1,911,500. Forty percent of the customers pay on the 10th day and take discounts; the other 60% pay, on average, 42 days after their purchases. Assume 365 days in year for your calculations. a) What is the days sales outstanding? ______ days b) What is the average amount of receivables? Round your answer to the nearest dollar. $_______ c) What would…
1. Williams & Sons last year reported sales of $17 million and an inventory turnover ratio of 3.3. 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 7.7 while maintaining the same level of sales, how much cash will be freed up? Round your answer to the nearest dollar. $ _________ 2. Medwig Corporation has a DSO of 33 days. The company averages $4,250 in credit sales each day. What is the company’s average accounts receivable? Round your answer to the nearest dollar $ ________ 3. What is the nominal and effective cost of trade credit under the credit terms of 3/10, net 30? Assume 365 days in a year for your calculations. Round your answers to two decimal places. _______ % _______ % 4. A large retailer obtains merchandise under the credit terms of 1/15, net 35, but routinely takes 70 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. Round your answer to two decimal places. _____ % 5. A chain of appliance stores, APP Corporation, purchases inventory with a net price of $600,000 each day. The company purchases the inventory under the credit terms of 2/15, net 35. 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. $ ______ 6. McDowell Industries sells on terms of 3/10, net 30. Total sales for the year are $1,911,500. Forty percent of the customers pay on the 10th day and take discounts; the other 60% pay, on average, 42 days after their purchases. Assume 365 days in year for your calculations. a) What is the days sales outstanding? ______ days b) What is the average amount of receivables? Round your answer to the nearest dollar. $_______ c) What would…
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