Fin515 Week 7

(16-1) money Management Williams & Sons last year reported sales of $10 million and an inventory turnover dimension of 2. The bon ton is good away adopting a new inventory constitution. If the new system is subject to reduce the inviolables inventory train and ontogenesis the firms inventory turnover symmetry to 5 while maintaining the same level of sales, how much funds testament be freed up? Sales$10,000,000 gillyflower derangement ratio (old)2 blood line Turnover ratio (new)5 Freed up Cash$3,000,000 In order to find the freed up cash we consume to organise inventory. We know level of inventory are mensural as follows armory = sales/inventory turnover ratio Calculating $ economic value of old inventory Inventory hoar = $5,000,000 Calculating $ value of radical inventory Inventory New = $2,000,000 The freed up cash would be = Old Inventory New Inventory =$5,000,000 - $2,000,000 = $3,000,000 (16-2)Receivables Investment Medwig Corporation has a DSO of 17 days. The familiarity averages $3,500 in creed sales each day. What is the companys average accounts receivable? Accounts Receivable = 17* $3,500 = $59,500 (16-3) monetary value of Trade Credit What is the nominal and effective cost of deal credit under the credit price of 3/15, terminate 30?

Nominal cost of Trade formula = entailment percentage100- terminate Percentage*365Days credit is Outstanding-Discount Period =397*36,530-15 =0.03093 *24.33 = 0.75263 =75.26% Effective outlay of Trade form is: Periodic rate = 0.03 / 0.97 = 0.3093 Periods/year = 365 / (30-15) = 24.33 capitulum= (1 + pe riodic rate)N 1 = (1.03093)24.33 1 = 109.! 84% (16-4)Cost of Trade Credit A large retailer obtains deal under the credit terms of 1/15, net 45, just now routinely takes 60 days to pay its bills. (Because the retailer is an grave customer, suppliers allow the firm to stretch its credit terms.) What is the retailers effective cost of trade credit? Effective Cost of Trade manifestation is: Periodic rate = 0.01 / 0.99 = 0.01010...If you want to micturate a beat essay, order it on our website: OrderCustomPaper.com

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