Foundations Of Finance
10th Edition
ISBN: 9780134897264
Author: KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher: Pearson,
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Textbook Question
Chapter 4, Problem 8SP
(Evaluating liquidity) The Tabor Sales Company had a gross profit margin (gross profits ÷ sales) of 30 percent and sales of $9 million last year. Seventy-five percent of the firm’s sales are on credit and the remainder are cash sales. Tabor current assets equal $1.5 million, its current liabilities equal $300,000, and it has $100,000 in cash plus marketable securities.
- a. If Tabor’s accounts receivable are $562,500, what is its average collection period?
- b. If Tabor reduces its days in receivable (average collection period) to 20 days, what will be its new level of accounts receivable?
- c. Tabor’s inventory turnover ratio is 9 times. What is the level of Tabor’s inventories?
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The Brenmar Sales Company had a gross profit margin (gross
profits÷sales)
of
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percent and sales of
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million last year.
73
percent of the firm's sales are on credit, and the remainder are cash sales. Brenmar's current assets equal
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million, its current liabilities equal
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$109,000
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a. If Brenmar's accounts receivable equal
$562,900,
what is its average collection period?
b. If Brenmar reduces its average collection period to
25
days, what will be its new level of accounts receivable?
c. Brenmar's inventory turnover ratio is
9.3
times. What is the level of Brenmar's inventories?
he Brenmar Sales Company had a gross profit margin (gross
profits÷sales)
of
34
percent and sales of
$8.3
million last year.
79
percent of the firm's sales are on credit, and the remainder are cash sales. Brenmar's current assets equal
$1.5
million, its current liabilities equal
a. If Brenmar's accounts receivable equal
$563,000,
what is its average collection period?
b. If Brenmar reduces its average collection period to
25
days, what will be its new level of accounts receivable?
c. Brenmar's inventory turnover ratio is
8.9
times. What is the level of Brenmar's inventories?
$303,100,
and it has
$104,400
in cash plus marketable securities.
Mandesa, Inc has current liabilities of $8 million, current ratio of 2 times inventory turnover of 12 times, average collection period of 30 days, and credit sales of $64million. Calculate the value of cash and marketable securities.
Chapter 4 Solutions
Foundations Of Finance
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