Corporate Finance
12th Edition
ISBN: 9781259918940
Author: Ross, Stephen A.
Publisher: Mcgraw-hill Education,
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Chapter 26, Problem 10CQ
Summary Introduction
To identify: Whether it is ethical or not that large firm unilaterally lengthens the payable period especially when dealing with small suppliers.
Corporate ethics:
Corporate ethics are the ethical rules that have to be followed in a business while performing business activity. If the company does not follow the ethical rules at work place then the future of such company is in danger.
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Letni Corporation engages in the manufacture and sale of semiconductor chips for the computing and communications industries. During the past year, operating revenues remained relatively flat compared to the prior year but management notices a big increase in accounts receivable. The increase in receivables is largely due to the recent economic slowdown in the computing and telecommunications industries. Many of the company’s customers are having financial difficulty, lengthening the period of time it takes to collect on accounts. Below are year-end amounts.
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AccountsReceivable
AverageAge
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Two years ago
$
1,160,000
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136,000
5
days
$
0
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1,460,000
146,000
7
days
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Current year
1,560,000
316,000
40
days
0
Paul, the CEO of Letni, notices that accounts written off over the past three years have been minimal and, therefore, suggests that no allowance for uncollectible accounts be…
Letni Corporation engages in the manufacture and sale of semiconductor chips for the computing and communications industries. During the past year, operating revenues remained relatively flat compared to the prior year but management notices a big increase in accounts receivable. The increase in receivables is largely due to the recent economic slowdown in the computing and telecommunications industries. Many of the company’s customers are having financial difficulty, lengthening the period of time it takes to collect on accounts. Below are year-end amounts.
Age Group
OperatingRevenue
AccountsReceivable
AverageAge
AccountsWritten Off
Two years ago
$1,160,000
$136,000
5
days
$0
Last year
1,460,000
146,000
7
days
1,000
Current year
1,560,000
316,000
40
days
0
Paul, the CEO of Letni, notices that accounts written off over the past three years have been minimal and, therefore, suggests that no allowance for…
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Corporate Finance
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