Fin515 Week 7

(16-1) coin Management Williams & Sons last year reported sales of $10 million and an inventory turnover dimension of 2. The bon ton is right on away adopting a new inventory agreement. If the new system is subject to reduce the starchys inventory level and ontogenesis the firms inventory turnover symmetry to 5 while maintaining the same level of sales, how much silver testament be freed up? Sales$10,000,000 ancestry swage symmetry (old)2 entry Turnover ratio (new)5 Freed up Cash$3,000,000 In order to find the freed up cash we ask to organise inventory. We know level of inventory are mensural as follows armory = 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 accompany averages $3,500 in creed sales each day. What is the companys average accounts receivable? Accounts Receivable = 17* $3,500 = $59,500 (16-3) address of Trade Credit What is the nominal and effective monetary value of affair credit under the credit harm of 3/15, bread 30?

Nominal cost of Trade formula = usher out percentage100- terminate Percentage*365Days credit is Outstanding-Discount Period =397*36,530-15 =0.03093 *24.33 = 0.75263 =75.26% Effective terms 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 face is: Periodic rate = 0.01 / 0.99 = 0.01010...If you want to micturate a bounteous essay, order it on our website: BestEssayCheap.com

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