myasirns
Nov 7, 2010, 01:43 AM
Exercises
1. A chain of appliance stores, A2Z Corporation, purchases inventory with a net price of $500,000 each day. The company purchases the inventory under the credit terms of 2/20, net 40. A2Z always takes the discount, but takes the full 20 days to pay its bills. What are the average accounts payable for A2Z?
2. McDowell Industries sells on terms of 3/10, net 30. Total sales for the year are $912,500. Forty percent of the customers pay on the 10th day and take discounts. The other 60 percent pay, on average, 40 days after their purchases.
a) What is the days sale outstanding (DSO)?
b) What is the average amount of receivables?
c) What would happen to average receivables if McDowell toughened up on its collection policy with the result that all non discount customers paid on the 30th day?
3. The Zedan Corporation has an inventory conversion period of 75 days, a receivables collection period of 38 days, and a payables deferral period of 30 days.
a) What is the length of the firms' cash conversion cycle.
b) If Zedan's annual sales are $3,421,875 and all sales are on credit, what is the firm's investment in accounts receivables?
c) How many times per year does Zedan turn over its inventory?
Submission:
a) The assignment should be prepared in word document. Recommended font is Times New Roman: Size 12.
b) Due date of submission: November 06, 2010.
1. A chain of appliance stores, A2Z Corporation, purchases inventory with a net price of $500,000 each day. The company purchases the inventory under the credit terms of 2/20, net 40. A2Z always takes the discount, but takes the full 20 days to pay its bills. What are the average accounts payable for A2Z?
2. McDowell Industries sells on terms of 3/10, net 30. Total sales for the year are $912,500. Forty percent of the customers pay on the 10th day and take discounts. The other 60 percent pay, on average, 40 days after their purchases.
a) What is the days sale outstanding (DSO)?
b) What is the average amount of receivables?
c) What would happen to average receivables if McDowell toughened up on its collection policy with the result that all non discount customers paid on the 30th day?
3. The Zedan Corporation has an inventory conversion period of 75 days, a receivables collection period of 38 days, and a payables deferral period of 30 days.
a) What is the length of the firms' cash conversion cycle.
b) If Zedan's annual sales are $3,421,875 and all sales are on credit, what is the firm's investment in accounts receivables?
c) How many times per year does Zedan turn over its inventory?
Submission:
a) The assignment should be prepared in word document. Recommended font is Times New Roman: Size 12.
b) Due date of submission: November 06, 2010.