FIN100

Week 9 Homework

Chapter 15

P2.

The Robinson Company has the following current assets and current liabilities for these two years.

 

2010

2011

Cash and marketable securites

$50,000

50,000

Accounts receivable

300,000

350,000

Inventories

350,000

500,000

Total current assets

700,000

900,000

Accounts payable

200,000

250,000

Bank Loan

0

150,000

Accurals

150,000

200,000

Total current liabilities

350,000

600,000

If sales in 2010 were $1.2 million, sales in 2011 were $1.3 million, and sot of goods sold was 70 percent of sales, how long were Robinson’s operation cycles and cash conversion cycles in each of these years? What caused them to change during this time?

P3.

The Robinson Company from Problem 2 had net sales of $1,200,000 in 2010 and $1,300,000 in 2011.

a. Determine the receivables turnover in each year.

b. Calculate the average collections period for each year.

c. Based on the receivables turnover for 2010, estimate the investment in receivables if the net sales were $1,300,000 in 2011.

d. How much of a change in the 2011 receivable occurred?

P4

.

Suppose the Robinson Company had a cost of goods sold of $1,000,000 in 2010 and $1,200,000 in 2011.

a. Calculate the inventory turnover for each year. Comment on your findings.

b. What would have been the amount of inventories in 2011 if the 2010 turnover ratio had been maintained?

P4

Chapter 16

P1.

A supplier is offering your firm a cash discount of 2 percent if purchases are paid for within ten days; otherwise the bill is due at the end of sixty days. Would you recommend borrowing from a back at an 18 percent annual interest rate to take advantage of the cash discount offer? Explain your answer.

P2.

Assume that you have been offered cash discounts on merchandise that can be purchased from either of two suppliers. Supplier A offers trade credit terms of3/20, net 70, while supplier B offers 4/15, net 80. What is the approximate effective cost of missing the cash discounts from each supplier? If you could not take advantage of either cash discount offer, which supplier would you select?

P7.

Bank A offers loans with a 10 percent stated annual rate and a 10 percent compensation balance. You wish to obtain $250,000 in a six month loan.

a. How much must you borrow to obtain $250,000 in usable funds? Assume you currently do not have any funds on deposit at the bank. What is the effective annual rate on a six month loan?

b. How much must you borrow to obtain $250,000 in usable funds if you currently have $10,000 on deposit at the bank? What is the effective annual rate on a six-month loan?

c. How much must you borrow to obtain $250,000 is usable funds if you currently have $30,000 on deposit at the bank?

d. What is the effective annual rate on a six-month loan?