Question 5 a. Cash discounts will normally appear on an invoice in terms such as 2/10 n30. What does this mean for an invoice of value GH¢10,000? b. Extracts from the profit and loss account for the year and the balance sheet as at the end of the year for NORA Enterprise are shown below. Assume all sales and purchases are on credit terms. Item Sales Amount GH¢ 200,000 Cost of goods sold 150,000 Purchases 120,000 Accounts Receivable 35,500 Accounts Payable 18,000 Inventory Finished goods 15,000 Work in progress 28,000 37,000 Raw materials i. Calculate the overall inventory turnover period and ratio. ii. Calculate the accounts receivable turnover period and ratio. iii. Compute the accounts payable turn over period and ratio. iv. What do the values computed in (a), (b) and (c) mean? v. What is the length of the operating cycle and the cash conversion cycle?
Question 5 a. Cash discounts will normally appear on an invoice in terms such as 2/10 n30. What does this mean for an invoice of value GH¢10,000? b. Extracts from the profit and loss account for the year and the balance sheet as at the end of the year for NORA Enterprise are shown below. Assume all sales and purchases are on credit terms. Item Sales Amount GH¢ 200,000 Cost of goods sold 150,000 Purchases 120,000 Accounts Receivable 35,500 Accounts Payable 18,000 Inventory Finished goods 15,000 Work in progress 28,000 37,000 Raw materials i. Calculate the overall inventory turnover period and ratio. ii. Calculate the accounts receivable turnover period and ratio. iii. Compute the accounts payable turn over period and ratio. iv. What do the values computed in (a), (b) and (c) mean? v. What is the length of the operating cycle and the cash conversion cycle?
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:Question 5
a. Cash discounts will normally appear on an invoice in
terms such as 2/10 n30. What does this mean for an
invoice of value GH¢10,000?
b. Extracts from the profit and loss account for the year
and the balance sheet as at the end of the year for
NORA Enterprise are shown below. Assume all sales
and purchases are on credit terms.
Item
Sales
Amount GH¢
200,000
Cost of goods sold 150,000
Purchases
120,000
Accounts Receivable 35,500
Accounts Payable
18,000
Inventory
Finished goods
15,000
Work in progress
28,000
37,000
Raw materials
i. Calculate the overall inventory turnover period and ratio.
ii. Calculate the accounts receivable turnover period and ratio.
iii. Compute the accounts payable turn over period and ratio.
iv. What do the values computed in (a), (b) and (c) mean?
v. What is the length of the operating cycle and the cash
conversion cycle?
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