Financial Management: Theory & Practice
16th Edition
ISBN: 9781337909730
Author: Brigham
Publisher: Cengage
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Chapter 16, Problem 15P
a)
Summary Introduction
To determine: Average amount of accounts payable net of discounts.
b)
Summary Introduction
To discuss: Whether the firm uses any cost of trade credit in this situation.
c)
Summary Introduction
To determine: Average payables and nominal and effective costs of non-free trade credit when firm did not take any discounts but payment made on due date.
d)
Summary Introduction
To determine: Nominal and effective costs, when it could stretch payments to 40 days.
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Cash Discounts
Suppose a firm makes purchases of $3.65 million per year under terms of 2/10, net 30, and
takes discounts.
a. What is the average amount of accounts payable net of discounts? (Assume the
$3.65 million of purchases is net of discounts-that is, gross purchases
are $3,724,489.80, discounts are $74,489.80, and net purchases are $3.65 million.)
b. Is there a cost of the trade credit the firm uses?
c. If the firm did not take discounts but did pay on the due date, what would be its
average payables and the cost of this nonfree trade credit?
d. What would be the firm's cost of not taking discounts if it could stretch its payments
to 40 days?
еВook
Zane Corporation has an inventory conversion period of 90 days, an average collection period of 34 days, and a payables deferral period of 48 days. Assume 365 days in year for your calculations.
a. What is the length of the cash conversion cycle? Round your answer to two decimal places.
days
b. If Zane's annual sales are $3,454,540 and all sales are on credit, what is the investment in accounts receivable? Do not round intermediate calculations. Round your answer to the nearest cent.
$
c. How many times per year does Zane turn over its inventory? Assume that the cost of goods sold is 75% of sales. Use sales in the numerator to calculate the turnover ratio. Do not round intermediate calculations. Round your answer to two decimal places.
Chapter 16 Solutions
Financial Management: Theory & Practice
Ch. 16 - Define each of the following terms:
Working...Ch. 16 - What are the two principal reasons for holding...Ch. 16 - Prob. 3QCh. 16 - Prob. 4QCh. 16 - Prob. 5QCh. 16 - Prob. 6QCh. 16 - Prob. 7QCh. 16 - Prob. 8QCh. 16 - What kinds of firms use commercial paper?
Ch. 16 - Prob. 1P
Ch. 16 - Medwig Corporation has a DSO of 17 days. The...Ch. 16 - What are the nominal and effective costs of trade...Ch. 16 - Prob. 4PCh. 16 - Prob. 5PCh. 16 - Snider Industries sells on terms of 2/10, net 45....Ch. 16 - Calculate the nominal annual cost of trade credit...Ch. 16 - Captain Whitman Ship Supplies offers terms of...Ch. 16 - Grunewald Industries sells on terms of 2/10, net...Ch. 16 - The D.J. Masson Corporation needs to raise...Ch. 16 - Negus Enterprises has an inventory conversion...Ch. 16 - Prob. 12PCh. 16 - Payne Products had 1.6 million in sales revenues...Ch. 16 - Dorothy Koehl recently leased space in the...Ch. 16 - Prob. 15PCh. 16 - Prob. 16PCh. 16 - The Raattama Corporation had sales of 3.5 million...Ch. 16 - Start with the partial model in the file Ch16 P18...Ch. 16 - Prob. 1MCCh. 16 - Prob. 2MCCh. 16 - Prob. 3MCCh. 16 - Is there any reason to think that RR may be...Ch. 16 - Prob. 5MCCh. 16 - Johnson knows that RR sells on the same credit...Ch. 16 - Prob. 7MCCh. 16 - Prob. 8MCCh. 16 - What is the impact of higher levels of accruals,...Ch. 16 - Assume that RR purchases $200,000 (net of...Ch. 16 - Prob. 11MCCh. 16 - Prob. 12MCCh. 16 - Prob. 13MCCh. 16 - Prob. 14MCCh. 16 - Prob. 15MCCh. 16 - In an attempt to better understand RR’s cash...
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