Chapter 15 Problem 1
Chapter 15 Problem 1
Pretty Lady Cosmetic Products has an average production process time of 40 days. Finished goods are kept on hand for an average of 15 days before they are sold. Accounts receivable are outstanding an average of 35 days, and the firm receives 40 days of credit on its purchases from suppliers.
a. Estimate the average length of the firm’s short-term operating cycle. How often would the cycle turn over in a year?
b. Assume net sales of $1,200,000 and cost of goods sold of $900,000. Determine the average investment in accounts receivable, inventories, and accounts payable. What would be the net financing need considering only these three accounts?
Chapter 16 Problem 1
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 60 days. Would you recommend borrowing from a bank at an 18 percent annual interest rate to take advantage of the cash discount offer? Explain your answer.
Chapter 15 Problem
1
Pretty Lady Cosmetic Products has an average production process time of 40 days.
Finished
goods are kept on hand for an average of 15 days before they are sold. Accounts
receivable are outstanding an average of 35 days, and the firm receives 40 days of credit on its
purchases from suppliers.
a.
Estimate the average length of the firm’s short
–
term
operating cycle. How often
would the cycle turn over in a year?
b.
Assume net sales of $1,200,000 and cost of goods sold of $900,000. Determine
the average investment in accounts receivable, inventories, and accounts payable. What would be
the net financing
need considering only these three accounts?
Chapter 16 Problem 1
A supplier is offering your firm a cash discount of 2 perce
nt if purchases are paid for
within ten days; otherwise, the bill is due at the end of 60 days. Would you recommend
borrowing from a bank at an 18 percent annual interest rate to take advantage of the cash
discount offer?
Explain your answer
.
Chapter 15 Problem 1
Pretty Lady Cosmetic Products has an average production process time of 40 days.
Finished goods are kept on hand for an average of 15 days before they are sold. Accounts
receivable are outstanding an average of 35 days, and the firm receives 40 days of credit on its
purchases from suppliers.
a. Estimate the average length of the firm’s short-term operating cycle. How often
would the cycle turn over in a year?
b. Assume net sales of $1,200,000 and cost of goods sold of $900,000. Determine
the average investment in accounts receivable, inventories, and accounts payable. What would be
the net financing need considering only these three accounts?
Chapter 16 Problem 1
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 60 days. Would you recommend
borrowing from a bank at an 18 percent annual interest rate to take advantage of the cash
discount offer? Explain your answer.