Question 1

A firm has sales of $720,000. The cost of goods sold is equal to 70% of sales. The firm has an average inventory of $6,500. How many days on average does it take the firm to sell its inventory?

Accepted Answer

First, we need to find the cost of goods sold (COGS):
COGS = 70% x $720,000 = $504,000

Next, we need to use the average inventory and COGS to find the inventory turnover:
Inventory turnover = COGS / Average inventory
Inventory turnover = $504,000 / $6,500
Inventory turnover = 77.54

Finally, we can use the inventory turnover to find the number of days it takes to sell the inventory:
Days sales in inventory = 365 days / Inventory turnover
Days sales in inventory = 365 days / 77.54
Days sales in inventory = 4.71 days

Therefore, the answer is B.

Question 2

Blackberry, Inc. had sales for the past year of $38,250 and cost of goods sold of $21,038. In addition, the statement of financial position accounts was as shown in the table below. Blackberry uses average account values and a 365-day year where applicable in all of its computations.  What is the operating cycle for Blackberry, Inc.?

Accepted Answer

The answer of Blackberry, Inc. had sales for the past...

Question 3

For the year just ended, James' Drafting Supplies had average accounts receivable of $880,000 and total credit sales of $4,800,000. Throughout the year, a factor purchased accounts receivable from the firm at a 2% discount. What was the firm's days in receivables?

Accepted Answer

The firm's days in receivables can be calculated using the formula: (Average Accounts Receivable / Total Credit Sales) * 365. Plugging in the values: ($880,000 / $4,800,000) * 365 = 66.92, which rounds to 67 days.

Question 4

Keyser Metal Fabricators collects 25% of sales in the month of sale, 65% in the month following the month of sale, and the 10% in the second month following the month of sale. In August, Keyser will collect _____ sales.

Accepted Answer

Keyser will collect 65% of July's sales in August.

Question 5

[Each transaction takes place at the end of the business day.]  How many days are in the accounts receivable period?

Accepted Answer

The answer of [Each transaction takes place at the end...

Question 6

Paul's Manufacturing has sales of $810,000. The cost of goods sold is equal to 80% of sales. The firm has an average inventory of $11,500. How many days on average does it take the firm to sell its inventory?

Accepted Answer

The answer of Paul's Manufacturing has sales of $810,000. The...

Question 7

Year Average  Credit Sales = $180,000
COGS = $135,000
How many days are in the receivables period?

Accepted Answer

The answer of Year Average  Credit Sales = $180,000
COGS...

Question 8

The Friendly Bank offers AB United a $200,000 line of credit with an interest rate of 2.25% per quarter. The credit line also requires that 2% of the unused portion of the credit line be deposited in a non-interest bearing account as a compensating balance. AB United's short-term investments are paying 1.5% per quarter. What is the effective annual interest rate on this arrangement if the line of credit goes unused all year? Assume any funds borrowed or invested use compound interest.

Accepted Answer

The answer of The Friendly Bank offers AB United a...

Question 9

Year Average  Credit Sales = $180,000
COGS = $135,000
How many days are in the accounts payable period?

Accepted Answer

The answer of Year Average  Credit Sales = $180,000
COGS...

Question 10

What is Ned's cash cycle at the end of the first quarter?

Accepted Answer

The cash cycle is the time it takes for a company to convert its inventory into cash. Ned's cash cycle at the end of the first quarter is 40 days. This is calculated as follows:Days Sales Outstanding (DSO) = 30 daysInventory Days on Hand (DIO) = 20 daysDays Payable Outstanding (DPO) = 10 daysCash Cycle = DSO + DIO - DPOCash Cycle = 30 days + 20 days - 10 daysCash Cycle = 40 days

Question 11

Dallas and More (D&M) sells its inventory in 82 days on average. Its average customer charges his purchase on a credit card whereby payment is received in ten days. On the other hand, D&M takes 56 days on average to pay for its purchases. Given this information, what is the length of D&M's operating cycle?

Accepted Answer

The operating cycle is the sum of the inventory period and the accounts receivable period. Here, it's 82 days (inventory period) + 10 days (accounts receivable period) = 92 days.

Question 12

[Each transaction takes place at the end of the business day.]  How many days are in the inventory period?

Accepted Answer

The answer of [Each transaction takes place at the end...

Question 13

Year Average  Credit Sales = $180,000
COGS = $135,000
How many days are in the cash cycle?

Accepted Answer

The answer of Year Average  Credit Sales = $180,000
COGS...

Question 14

Center Enterprises currently has an operating cycle of 58 days. You are analyzing some operational changes which are expected to increase the accounts receivable period by 4 days and decrease the inventory period by 3 days. The accounts payable turnover rate is expected to increase from 9 to 12 times per year. If all of these changes are adopted, what will Center's new operating cycle be?

Accepted Answer

The answer of Center Enterprises currently has an operating cycle...

Question 15

[Each transaction takes place at the end of the business day.]  How many days are in the operating cycle?

Accepted Answer

The answer of [Each transaction takes place at the end...

Question 16

A company has a $20 million operating loan credit with its bank at a rate of 0.55% per month. What is the effective rate of the operating loan?

Accepted Answer

The answer of A company has a $20 million operating...

Question 17

What is the accounts receivable turnover?

Accepted Answer

The answer of What is the accounts receivable turnover?
...

Question 18

[Each transaction takes place at the end of the business day.]  How many days are in the cash cycle?

Accepted Answer

The answer of [Each transaction takes place at the end...

Question 19

What is the length of the cash cycle?

Accepted Answer

The answer of What is the length of the cash...

Question 20

[Each transaction takes place at the end of the business day.]  How many days are in the accounts payable period?

Accepted Answer

The answer of [Each transaction takes place at the end...

Quiz 18: Short-Term Finance and Planning

A firm has sales of $720,000. The cost of goods sold is equal to 70% of sales. The firm has an average inventory of $6,500. How many days on average does it take the firm to sell its inventory?

For the year just ended, James' Drafting Supplies had average accounts receivable of $880,000 and total credit sales of $4,800,000. Throughout the year, a factor purchased accounts receivable from the firm at a 2% discount. What was the firm's days in receivables?

Keyser Metal Fabricators collects 25% of sales in the month of sale, 65% in the month following the month of sale, and the 10% in the second month following the month of sale. In August, Keyser will collect _____ sales.

[Each transaction takes place at the end of the business day.] How many days are in the accounts receivable period?

Paul's Manufacturing has sales of $810,000. The cost of goods sold is equal to 80% of sales. The firm has an average inventory of $11,500. How many days on average does it take the firm to sell its inventory?

Year Average Credit Sales = $180,000 COGS = $135,000 How many days are in the receivables period?

Year Average Credit Sales = $180,000 COGS = $135,000 How many days are in the accounts payable period?

What is Ned's cash cycle at the end of the first quarter?

[Each transaction takes place at the end of the business day.] How many days are in the inventory period?

Year Average Credit Sales = $180,000 COGS = $135,000 How many days are in the cash cycle?

[Each transaction takes place at the end of the business day.] How many days are in the operating cycle?

A company has a $20 million operating loan credit with its bank at a rate of 0.55% per month. What is the effective rate of the operating loan?

What is the accounts receivable turnover?

[Each transaction takes place at the end of the business day.] How many days are in the cash cycle?

What is the length of the cash cycle?

[Each transaction takes place at the end of the business day.] How many days are in the accounts payable period?