nsu fin5130 module 5 discussion latest 2017 october

Module 5 discussion Problem set 1 Determine whether the following is a source or use of fund: A dividend is paid Issue of shortterm debt Long-term debt decreased by $1 000 000 Next year’s taxes are prepaid Wages and salaies are paid Accounts receivable balance is reduced Accounts payable balance is reduced Marketable Securities are purchased Marketable Securities are liquidated A bank loan is repaid Problem set 2 Determine whether the following will INCREASE DECREASE or have NO EFFECT on the operating cycle Accounts payable goes up Accounts receivable goes down Customers take longer to pay for the goods Payments to suppliers are accelerated Inventory takes longer to get sold Accounts Receivables Turnover ratio increases from 5 times to 7 times Accounts Payable Turnover ratio increases from 5 times to 7 times InventoryTurnover ratio increases from 5 times to 7 times Problem set 3 ABC Corporation has the following sales collection policy: 25% of the sales are on cash and the remainder on credit. 40% of the credit sales are received in the first month after the sale. 40% of the credit sales are received in the second month after the sale. 18% of the credit sales are received in the third month of after the sale. 2% of the credit sales are bad debts and not received. Suppose the company has the following expected sales: Jan $50 000 Feb $60 000 March $70 000 April $45 000 May $66 000. Determine the cash collections for May. ABC Corporation has the following sales collection policy: 25% of the sales are received in the same month 50% of the sales are received in the first month after the sale. 20% of the sales are received in the second month after the sale. The remainder are received in the third month after the sale. Suppose the company has the following expected sales: Jan $50 000 Feb $60 000 March $70 000 April $45 000 May $66 000. Determine the cash collections for May. Problem set 4 The terms of trade are 2/15 net 60. Compute the effective rate of forgoing the cash discount. A company has an average collection period of 20 days and A/R balance of $100 000. Compute the annual credit sales. Assume 365 days. A company has an average collection period of 25 days and annual credit sales of $300 000. Compute the A/R balance. Assume 365 days. Problem set 5 The terms of the sale were 1/7 net 21. What is the effective annual rate of interest for the credit period for this sale? ABC Company sells 3 500 units of its product each year at a price per unit of $275. All sales are on credit with terms of 1/7 net 30. The discount is taken by 40 percent of the customers. What is the average collection period? What is the amount of the company’s accounts receivable ? ABC Company has an average collection period of 18 days and annual sales of $694 000. What is the average investment in accounts receivables as shown on the balance sheet?