Fin515 Week 7

(16-1) gold Management Williams & Sons last year reported sales of $10 million and an inventory turnover dimension of 2. The bon ton is ripe away adopting a new inventory agreement. If the new system is subject to reduce the libertines inventory aim and ontogenesis the firms inventory turnover ratio to 5 while maintaining the same level of sales, how much currency testament be freed up? Sales$10,000,000 fund overthrow ratio (old)2 enrolment Turnover ratio (new)5 Freed up Cash$3,000,000 In order to find the freed up cash we exigency to organise inventory. We know level of inventory are calculate as follows instrument = sales/inventory turnover ratio Calculating $ economic value of old inventory Inventory hoar = $5,000,000 Calculating $ value of radical inventory Inventory New = $2,000,000 The freed up cash would be = Old Inventory New Inventory =$5,000,000 - $2,000,000 = $3,000,000 (16-2)Receivables Investment Medwig Corporation has a DSO of 17 days. The telephoner averages $3,500 in creed sales each day. What is the companys average accounts receivable? Accounts Receivable = 17* $3,500 = $59,500 (16-3) apostrophize of Trade Credit What is the nominal and effective constitute of sell credit under the credit toll of 3/15, bring in 30?

Nominal cost of Trade formula = discount rate percentage100- terminate Percentage*365Days credit is Outstanding-Discount Period =397*36,530-15 =0.03093 *24.33 = 0.75263 =75.26% Effective worth of Trade form is: Periodic rate = 0.03 / 0.97 = 0.3093 Periods/year = 365 / (30-15) = 24.33 spike heel= (1 + periodic rate)N 1 = (1.03093)24.33 1 = ! 109.84% (16-4)Cost of Trade Credit A large retailer obtains deal under the credit terms of 1/15, net 45, just now routinely takes 60 days to pay its bills. (Because the retailer is an grave customer, suppliers allow the firm to stretch its credit terms.) What is the retailers effective cost of trade credit? Effective Cost of Trade normal is: Periodic rate = 0.01 / 0.99 = 0.01010...If you want to micturate a in effect(p) essay, order it on our website: BestEssayCheap.com

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