Annual volume of box (in master cases): 500,000 Net price per master case: $75.00 Credit terms: 1%, 15;...
Annual volume of box (in master cases): 500,000
Net price per master case: $75.00
Credit terms: 1%, 15; net 45.
According to the firm’s management, 45% of the customers take the discount and pay on Day 15; 50% pay at the end of the credit period on Day 45; the final 5% pay late on Day 50.
1) What is Box Firm current “Days Sales Outstanding” (DSO), based on the
information provided by the firm’s management?
2) Calculate Box Firm “Average Daily Sales,” assuming a 365-day year?
3) Based upon the information you have calculated in Questions #1 and #2 above, calculate
the firm’s “Accounts Receivable” balance
Homework Answers
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Annual volume of box (in master cases): 500,000
Net price per master case: $75.00
Credit terms: 1%, 15;...
Cost of Trade Credit Grunewald Industries sells on terms of 1/10, net 40. Gross sales last...
Cost of Trade Credit Grunewald Industries sells on terms of 1/10, net 40. Gross sales last year were $4,599,000 and accounts receivable averaged $495,000. Half of Grunewald's customers paid on the 10th day and took discounts. What are the nominal and effective costs of trade credit to Grunewald's nondiscount customers? (Hint: Calculate daily sales based on a 365-day year, calculate the average receivables for discount customers, and then find the DSO for the nondiscount customers.) Do not round intermediate calculations....
1)Grunewald Industries sells on terms of 3/10, net 50. Gross sales last year were $4,781,500 and...
1)Grunewald Industries sells on terms of 3/10, net 50. Gross sales last year were $4,781,500 and accounts receivable averaged $589,500. Half of Grunewald's customers paid on the 10th day and took discounts. What are the nominal and effective costs of trade credit to Grunewald's nondiscount customers? (Hint: Calculate daily sales based on a 365-day year, calculate the average receivables for discount customers, and then find the DSO for the nondiscount customers.) Do not round intermediate calculations. Round your answers to...
A large retailer obtains merchandise under the credit terms of 1/15, net 40, but routinely takes...
A large retailer obtains merchandise under the credit terms of 1/15, net 40, but routinely takes 50 days to pay its bills. (Because the retailer is an important customer, suppliers allow the firm to stretch its credit terms.) What is the retailer's effective cost of trade credit? Assume a 365-day year. Do not round intermediate calculations. Round your answer to two decimal places.
1) Sale = $5,000,000, COGS = 35% of sales, DIH = 25 Days, Credit terms from...
1) Sale = $5,000,000, COGS = 35% of sales, DIH = 25 Days, Credit terms from supplier = Net 35 (DPO), Credit terms to customer = Net 30 (DSO). Interest rate is 6%. Calculate the NPV of sales. 2) Use the following information to calculate these various solvency measures: a) NWC, b) WCR, c) Current ratio, d) Quick ratio e) Cash Conversion Efficiency (CCE) f) Days cash held (DCH) -Cash $150000 -Current asset $900,000 -Current liability $700,000 -Inventory $350,000Receivable $250,000...
A large retailer obtains merchandise under the credit terms of 2/15, net 30, but routinely takes...
A large retailer obtains merchandise under the credit terms of 2/15, net 30, but routinely takes 50 days to pay its bills. (Because the retailer is an important customer, suppliers allow the firm to stretch its credit terms.) What is the retailer's effective cost of trade credit? Assume a 365-day year. Do not round intermediate calculations. Round your answer to two decimal places.
Perpetually Slow Pay, Inc. buys on terms of 3/15, net 45. It does not take the...
Perpetually Slow Pay, Inc. buys on terms of 3/15, net 45. It does not take the discount, and it generally pays after 75 days. What is the nominal annual percentage cost of its non-free trade credit, based on a 365-day year? Enter your answer rounded to two decimal places. Do not enter % in the answer box. For example, if your answer is 0.12345 or 12.345% then enter as 12.35 in the answer box.
A large retailer obtains merchandise under the credit terms of 1/15, net 45, but routinely takes...
A large retailer obtains merchandise under the credit terms of 1/15, net 45, but routinely takes 65 days to pay its bills. (Because the retailer is an important customer, suppliers allow the firm to stretch its credit terms.) What is the retailer's effective cost of trade credit? Assume 365 days in year for your calculations. Do not round intermediate calculations. Round your answer to two decimal places.
Calculate the annualized cost of the trade credit terms of 1/15, net 30 when payment is...
Calculate the annualized cost of the trade credit terms of 1/15, net 30 when payment is made on the net due date (assume a 365-day year).
A firm purchases $4,562,500 in goods over a 1-year period from its sole supplier. The supplier...
A firm purchases $4,562,500 in goods over a 1-year period from its sole supplier. The supplier offers trade credit under the following terms: 2/15, net 50 days. Davis finally chooses to pay on time (pay in the 50th day) but not to take the discount. We assume 365 days per year. What is the average level of the company’s free trade credit? $187,500 Based on the information from Question 31, what is the effective annual cost of the firm’s costly...
15. Accounts receivable Effective credit management involves establishing credit standards for extending credit to customers, determining...
15. Accounts receivable Effective credit management involves establishing credit standards for extending credit to customers, determining the company's terms of credit, and setting up procedures for invoicing and collecting past-due accounts. The following statement refers to a credit management policy. Select the best term to complete the sentence. How a company handles its credit accounts, indluding methods of invoicing and collecting past-due accounts, is indicated by the company's Consider the case of Ziff Corp.: Ziff Corp. has a very attractive...
15. Accounts receivable Effective credit management involves establishing credit standards for extending credit to customers, determining the company's terms of credit, and setting up procedures for invoicing and collecting past-due accounts. The following statement refers to a credit management policy. Select the best term to complete the sentence. How a company handles its credit accounts, indluding methods of invoicing and collecting past-due accounts, is indicated by the company's Consider the case of Ziff Corp.: Ziff Corp. has a very attractive...
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