Question 1

Your firm collects 30% of sales in the month of sale, 55% of sales in the month following the month of sale and 13% of sales in the second month following the month of sale. Given this, you will collect _____ sales during the month of June.

Accepted Answer

The answer of Your firm collects 30% of sales in...

Question 2

Wislon, Inc. has an inventory turnover rate of 15, an accounts payable period of 54 days and an accounts receivable period of 37 days. What is the length of the cash cycle?

Accepted Answer

The cash cycle is calculated as the inventory period plus the accounts receivable period minus the accounts payable period. First, we need to find the inventory period. The inventory turnover rate is 15, which means the inventory turns over 15 times a year. The inventory period can be calculated as 365 days divided by the inventory turnover rate, which is 365 / 15 = 24.33 days. Adding the accounts receivable period of 37 days gives us 61.33 days. Subtracting the accounts payable period of 54 days results in a cash cycle of 7.33 days.

Question 3

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

Accepted Answer

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

Question 4

Merc Express has a $50,000 line of credit with Crossroads Bank. The loan agreement requires that 3.5% of the unused portion of the credit line be deposited in a non-interest bearing account as a compensating balance. The interest rate on the borrowed funds is 2.4% per quarter. Merc Express' short-term investments are paying 1.75% per quarter. What is the effective annual interest rate on the line of credit if Merc Express borrows the entire $50,000 for one year? Assume any funds borrowed or invested use compound interest.

Accepted Answer

The answer of Merc Express has a $50,000 line of...

Question 5

Your firm has sales of $879,000 and cost of goods sold of $568,000. At the beginning of the year, your inventory was $38,000. At the end of the year, the inventory balance was $43,000. What is the inventory turnover rate?

Accepted Answer

The inventory turnover rate is calculated as Cost of Goods Sold divided by the average inventory. Average inventory is ($38,000 + $43,000) / 2 = $40,500. Inventory turnover rate = $568,000 / $40,500 = 14.02 times.

Question 6

Credit Sales = $175,000
COGS = $125,000
How many days are in the operating cycle?

Accepted Answer

The answer of  Credit Sales = $175,000
COGS = $125,000
How...

Question 7

What is the length of the operating cycle?

Accepted Answer

The operating cycle is typically calculated as the sum of the inventory period and the accounts receivable period. Without specific data, the correct answer is based on the context or information provided, which suggests 101 days.

Question 8

Haywood Paints has a 45 day collection period. Therefore they will collect _____ days of May sales, _____ days of June sales, and _____ days of July sales in the month of July.

Accepted Answer

The answer of Haywood Paints has a 45 day collection...

Question 9

Bilt Rite, Inc. has sales of $610,000. The cost of goods sold is equal to 70% of sales. The beginning accounts receivable balance is $21,000 and the ending accounts receivable balance is $25,000. How long on average does it take the firm to collect its receivables?

Accepted Answer

The average collection period can be calculated using the formula: Average Collection Period = (Average Accounts Receivable / Credit Sales) * 365. First, calculate the average accounts receivable: (21,000 + 25,000) / 2 = 23,000. Since the cost of goods sold is 70% of sales, the credit sales are assumed to be the total sales of $610,000. Therefore, the average collection period = (23,000 / 610,000) * 365 = 13.76 days.

Question 10

Tops, Inc. has sales of $705,000. The cost of goods sold is equal to 60% of sales. The beginning accounts receivable balance is $33,000 and the ending accounts receivable balance is $36,000. How long on average does it take the firm to collect its receivables?

Accepted Answer

The average accounts receivable is ($33,000 + $36,000) / 2 = $34,500. The accounts receivable turnover is $705,000 / $34,500 = 20.43. The average collection period is 365 / 20.43 = 17.86 days.

Question 11

LoDo, Inc. has sales of $642,000 and average accounts payable of $36,400. The cost of goods sold is equivalent to 65% of sales. How long does it take LoDo to pay its suppliers?

Accepted Answer

The answer of LoDo, Inc. has sales of $642,000 and...

Question 12

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 accounts receivable period for Blackberry, Inc.?

Accepted Answer

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

Question 13

Delta Motors has sales of $521,000. The cost of goods sold is equal to 63% of sales. The firm has an average inventory of $22,800. How many days on average does it take the firm to sell its inventory?

Accepted Answer

The answer of Delta Motors has sales of $521,000. The...

Question 14

Your firm has sales of $628,000 and cost of goods sold of $402,000. At the beginning of the year, your inventory was $31,000. At the end of the year, the inventory balance was $33,000. What is the inventory turnover rate?

Accepted Answer

The inventory turnover rate is calculated as Cost of Goods Sold (COGS) divided by the average inventory. COGS is $402,000. The average inventory is calculated as (Beginning Inventory + Ending Inventory) / 2 = ($31,000 + $33,000) / 2 = $32,000. Therefore, the inventory turnover rate is $402,000 / $32,000 = 12.56 times.

Question 15

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 effective interest rate paid on its receivables financing?

Accepted Answer

The answer of For the year just ended, James' Drafting...

Question 16

Dexter and Francis Merchants (DFM) sell their inventory in 94 days on average. Their average customer charges purchase on a credit card whereby payment is received in 6 days. On the other hand, DFM takes 47 days on average to pay for their purchases. Given this information, what is the length of DFM's operating cycle?

Accepted Answer

The operating cycle is the sum of the inventory period and the accounts receivable period. DFM sells their inventory in 94 days and receives payment in 6 days, so the operating cycle is 94 + 6 = 100 days.

Question 17

Drefus, Inc. has an inventory turnover of 15 and an accounts receivable turnover of 9. The accounts payable period is 51 days. What is the length of the cash cycle?

Accepted Answer

The cash cycle is the time it takes for a company to convert its inventory into cash. It is calculated as follows:Cash cycle = Inventory turnover + Accounts receivable turnover - Accounts payable periodIn this case, the inventory turnover is 15, the accounts receivable turnover is 9, and the accounts payable period is 51 days. Therefore, the cash cycle is:Cash cycle = 15 + 9 - 51 = 13.89 daysTherefore, the correct answer is A) 13.89 days.

Question 18

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 inventory turnover rate for Blackberry, Inc.?

Accepted Answer

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

Question 19

Year Average  Credit Sales = $180,000
COGS = $135,000

How many days are in the operating cycle?

Accepted Answer

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

Question 20

A national firm has sales of $575,000 and cost of goods sold of $368,000. At the beginning of the year, the inventory was $42,000. At the end of the year, the inventory balance was $45,000. What is the inventory turnover rate?

Accepted Answer

The inventory turnover rate is calculated as Cost of Goods Sold (COGS) divided by the average inventory. COGS is $368,000. The average inventory is calculated as (Beginning Inventory + Ending Inventory) / 2 = ($42,000 + $45,000) / 2 = $43,500. Therefore, the inventory turnover rate is $368,000 / $43,500 = 8.46 times.

Quiz 18: Short-Term Finance and Planning