EBK CORPORATE FINANCE
4th Edition
ISBN: 9780134202778
Author: DeMarzo
Publisher: PEARSON CUSTOM PUB.(CONSIGNMENT)
expand_more
expand_more
format_list_bulleted
Concept explainers
Videos
Question
Chapter 26, Problem 10P
Summary Introduction
To determine: The number of days to collect on the sales by M Corporation.
Introduction:
The number of outstanding days the customer has to pay the firm is termed as accounts receivable days.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Assume the credit terms offered to your firm by your suppliers are 4/20, net 50. Calculate the cost of the trade credit if your firm does not take the discount and pays on day 50. (Hint: Use a 365-day
year.)
The cost of trade credit is%. (Rounded to two decimal places.)
...
If a firm has sales of $25,689,00 a year, and the average collection period for the industry is 45 days, what should this firm's accounts receivable be in the firm is comparable to the industry?
he Brenmar Sales Company had a gross profit margin (gross
profits÷sales)
of
34
percent and sales of
$8.3
million last year.
79
percent of the firm's sales are on credit, and the remainder are cash sales. Brenmar's current assets equal
$1.5
million, its current liabilities equal
a. If Brenmar's accounts receivable equal
$563,000,
what is its average collection period?
b. If Brenmar reduces its average collection period to
25
days, what will be its new level of accounts receivable?
c. Brenmar's inventory turnover ratio is
8.9
times. What is the level of Brenmar's inventories?
$303,100,
and it has
$104,400
in cash plus marketable securities.
Chapter 26 Solutions
EBK CORPORATE FINANCE
Ch. 26.1 - What is the firms cash cycle? How does it differ...Ch. 26.1 - How does working capital impact a firms value?Ch. 26.2 - Prob. 1CCCh. 26.2 - Prob. 2CCCh. 26.3 - Prob. 1CCCh. 26.3 - Prob. 2CCCh. 26.4 - What is accounts payable days outstanding?Ch. 26.4 - What are the costs of stretching accounts payable?Ch. 26.5 - What are the benefits and costs of holding...Ch. 26.5 - Prob. 2CC
Ch. 26.6 - Prob. 1CCCh. 26.6 - Prob. 2CCCh. 26 - Prob. 1PCh. 26 - Prob. 2PCh. 26 - Aberdeen Outboard Motors is contemplating building...Ch. 26 - Prob. 4PCh. 26 - Prob. 5PCh. 26 - Prob. 6PCh. 26 - The Fast Reader Company supplies bulletin board...Ch. 26 - Prob. 8PCh. 26 - Prob. 9PCh. 26 - Prob. 10PCh. 26 - The Mighty Power Tool Company has the following...Ch. 26 - What is meant by stretching the accounts payable?Ch. 26 - Prob. 13PCh. 26 - Your firm purchases goods from its supplier on...Ch. 26 - Use the financial statements supplied on the next...Ch. 26 - Prob. 16PCh. 26 - Which of the following short-term securities would...
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.Similar questions
- If a firm has sales of $21,752,000 a year, and the average collection period for the industry is 45 days, what should this firm’s accounts receivable be if the firm is comparable to the industry? Assume there are 365 days in a year. Do not round intermediate calculations. Round your answer to the nearest dollar.arrow_forwardNegus Enterprises has an inventory conversion period of 50 days, an average collection period of 35 days, and a payables deferral period of 25 days. Assume that cost of goods sold is 80% of sales. What is the length of the firm’s cash conversion cycle? If annual sales are $4,380,000 and all sales are on credit, what is the firm’s investment in accounts receivable? how many times per year does Negus Enterprises turn over its inventory?arrow_forwardA company has average inventory of $12 million and COGS of $16 million. Its average accounts receivable is $2 million and it had $6 million in credit sales. Its average accounts payable is $3 million and it had $16 million in purchases. What is its CCC?arrow_forward
- A firm has annual sales of $100 million, $20 million of inventory, and $30 million of accounts receivable. What is its DSO?arrow_forwardAila Company has cash sales of P2,500,000 and net sales of P3,450,000, total assets of P1,240,000 and total liabilities of P275,000 representing notes payable. The firm’s operating margin is 16.1%, and it pays a 10% rate of interest on its notes payable. How much is the firm’s times-interest earned?arrow_forwardA company has annual sales of $730 million. If its DSO is 35, what isits average accounts receivables balance? ($70 million)arrow_forward
- The average total assets of Party Favors, Inc. amount to $110,000. The firm's total receivables are $7,000, representing 25 days' sales. The firm's profit margin is 8 percent. Use a 365-day year and round your answers to two decimals. A) What is Party Favor's asset turnover ratio? B) What is its ROA?arrow_forwardSimon Corporation has daily cash receipts of $70,000. A recent analysis of its collections indicated that customers' payments were in the mail an average of 3.0 days. Once received, the payments are processed in 2.0 days. After payments are deposited, it takes an average of 3.0 days for these receipts to clear the banking system. a. How much collection float (in days) does the firm currently have? b. If the firm's opportunity cost of capital is 8%, would it be economically advisable for the firm to pay an annual fee of $14,000 to reduce collection float by 2 days? Explain why or why not. c. What would the company's opportunity cost have to be to make the $14,000 fee worthwhile?arrow_forwardBerry Manufacturing turns over its inventory 8 times each year, has an Average Payment Period of 35 days and has an Average Collection Period of 60 days. The firm’s annual sales are $3.5 million. Assume there is no difference in the investment per dollar of sales in inventory, receivable, and payables and that there is a 365-day year. A. Calculate the Firm’s Operating Cycle. B. Calculate the Firm’s Cash Conversion Cycle. C. Calculate the Firm’s Daily Cash Operating Expenditure.arrow_forward
- The annual sales of a company are $235,000 including sales tax at 17.5%. Half of the sales are on credit terms, half are cash sales. The receivables in the statement of financial position are $23,500. What is the output tax?arrow_forwardEdwards Industries has $320 million in sales. The companyexpects that its sales will increase 12% this year. Edwards’ CFO uses a simple linearregression to forecast the company’s receivables level for a given level of projected sales.On the basis of recent history, the estimated relationship between receivables and sales (inmillions of dollars) is as follows:Receivables = $9.25 + 0.07(Sales)Given the estimated sales forecast and the estimated relationship between receivables andsales, what are your forecasts of the company’s year-end balance for receivables and itsyear-end days sales outstanding (DSO) ratio? Assume that DSO is calculated on the basisof a 365-day year.arrow_forwardMareez Pharma is trying to determine the effect of its inventory and receivable turnover ratios on its cash flow cycle. Mareez Pharma sales last year (all on credit) were $ 5,000,000, and its net profit was 10%. Its inventory turnover was 6.0 times during the year, and its average collection period was 40 days. Its annual cost of goods sold was $3,800,000. The firm had fixed assets totaling $1,500,000. Mareez Pharma payables deferral period is 50 days. Required: Calculate Mareez Pharma cash conversion cycle. Assuming Mareez Pharma holds negligible amounts of cash and marketable securities, calculate its total assets turnover and ROA. Suppose you have been recently hired by Mareez Pharma as CFO. Your finance manager who was expecting to be promoted as CFO has recommended you that it is possible to change annual inventory turnover to 9.5 times without affecting the sales. You know that management is keenly watching: cash conversion cycle, total assets turnover and ROA as your KPI.…arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Intermediate Financial Management (MindTap Course...FinanceISBN:9781337395083Author:Eugene F. Brigham, Phillip R. DavesPublisher:Cengage Learning
Intermediate Financial Management (MindTap Course...
Finance
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Cengage Learning
Accounts Receivable and Accounts Payable; Author: The Finance Storyteller;https://www.youtube.com/watch?v=x_aUWbQa878;License: Standard Youtube License