Loose Leaf for Foundations of Financial Management Format: Loose-leaf
17th Edition
ISBN: 9781260464924
Author: BLOCK
Publisher: Mcgraw Hill Publishers
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Textbook Question
Chapter 8, Problem 11P
McGriff Dog Food Company normally takes 27 days to pay for average daily credit purchases of
a. What is its net credit position? That is, compute its accounts receivable and accounts payable and subtract the latter from the former.
b. If the firm extends its average payment period from 27 days to 37 days (and all else remains the same), what is the firm’s new net credit position? Has it improved its cash flow?
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Terry's hardware normally takes 27 days to pay for average daily credit purchases of $9,530. Its average daily sales are $10,680, and it collects accounts in 32 days.
A. What is its net credit position? Compute its account receivable and accounts payable and subtract the latter from the former.
Accounts receivable = Average daily credit sales x Average collection period
Accounts payable = Average daily credit purchases x Average payment period
B. If the firm extends its average payment period from 27 days to 37 days (all else remains the same), what is the firm's new net credit position? Has it improved its cash flow?
McGriff Dog Food Company normally takes 30 days to pay for average daily credit purchases of $9,730. Its average daily sales
are $10,010, and it collects accounts in 32 days.
a. What is its net credit position?
Net credit position
b-1. If the firm extends its average payment period from 30 days to 37 days (and all else remains the same), what is the firm's
new net credit position? (Negative amount should be indicated by a minus sign.)
Net credit position
b-2. Has the firm improved its cash flow?
Yes
No
Route Canal Shipping Company has the following schedule for aging of accounts receivable:
Age of Receivables
April 30, 20X1
(3)
(2)
Age of
Account
0-30
31-60
61-90
91-120
(1)
Month of
Sales
April
March
February
January
Total receivables
Month of Sales
April
March
a. Calculate the percentage of amount due for each month.
February
January
Amounts
$120,540
86,100
103,320
34,440
$344,400
Total receivables
Percent of
Amount Due
%
%
%
do
(4)
Percent of
Amount Due
%
100 %
100%
Chapter 8 Solutions
Loose Leaf for Foundations of Financial Management Format: Loose-leaf
Ch. 8 - Under what circumstances would it be advisable to...Ch. 8 - Discuss the relative use of credit between large...Ch. 8 - Prob. 3DQCh. 8 - Prob. 4DQCh. 8 - Prob. 5DQCh. 8 - Prob. 6DQCh. 8 - Prob. 7DQCh. 8 - Prob. 8DQCh. 8 - Prob. 9DQCh. 8 - Prob. 10DQ
Ch. 8 - Prob. 11DQCh. 8 - Prob. 12DQCh. 8 - Compute the cost of not taking the following cash...Ch. 8 - Regis Clothiers can borrow from its bank at 17...Ch. 8 - Simmons Corp. can borrow from its bank at 17...Ch. 8 - Your bank will lend you $4,000 for 45 days at a...Ch. 8 - Prob. 5PCh. 8 - Prob. 6PCh. 8 - Mary Ott is going to borrow $10,400 for 120 days...Ch. 8 - Prob. 8PCh. 8 - Prob. 9PCh. 8 - Prob. 10PCh. 8 - McGriff Dog Food Company normally takes 27 days to...Ch. 8 - Maxim Air Filters Inc. plans to borrow $300,000...Ch. 8 - Digital Access Inc. needs $400,000 in funds for a...Ch. 8 - Carey Company is borrowing $200,000 for one year...Ch. 8 - Randall Corporation plans to borrow $233,000 for...Ch. 8 - Prob. 16PCh. 8 - Your company plans to borrow $13 million for 12...Ch. 8 - If you borrow $5,300 at $400 interest for one...Ch. 8 - Zerox Copying Company plans to borrow $172,000 ....Ch. 8 - Prob. 20PCh. 8 - Mr. Hugh Warner is a very cautious businessman....Ch. 8 - The Reynolds Corporation buys from its suppliers...Ch. 8 - Prob. 23PCh. 8 - Neveready Flashlights Inc. needs $340,000 to take...Ch. 8 - Harper Engine Company needs $631,000 to take a...Ch. 8 - Summit Record Company is negotiating with two...Ch. 8 - Charming Paper Company sells to the 12 accounts...Ch. 8 - The treasurer for Pittsburgh Iron Works wishes to...Ch. 8 - Prob. 2WECh. 8 - Prob. 3WE
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- Please Solve This Question 1. Medwing Corporation has a DSO of 19 days. The company averages 5,500 in credit sales each day. What is the company’s average accounts receivable?arrow_forwardAssume that ABC Corporation pays for each purchase three (3) weeks after date of purchase. Maintains its inventory at a level equal to 9-day sales and are made on a 30-day charge basis.How long the cash cycle is and how many cash cycles it has in one year? Solution: 2. If ABC Corporation has annual credit sales of Ᵽ990,000 and its average accounts receivable is Ᵽ100,000, how many is its average collection period? Assuming that receivable turnover rate increases by 25%, how much would then be the estimated change in accounts receivable.Solution: 3. The following data are available from the records of ABC Corporation Annual sales Ᵽ 396,000Cost 70%Average inventory 50,000Based on the above information determine the following:a) Number of days sales in average inventoryb) Average inventory assuming that desired inventory turnover rateis 12x in one year. Solution:arrow_forwardDome Metals has credit sales of $342,000 yearly with credit terms of net 45 days, which is also the average collection period. Dome does not offer a discount for early payment, so its customers take the full 45 days to pay. a. What is the average receivables balance? (Use a 360-day year.)b. What is the receivables turnover? (Use a 360-day year.)arrow_forward
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