4. Financial ratios in the forecasting process Your boss has asked you to take a closer look at your company's credit policies. You have been given the following information: Accounts receivable balance: Average daily sales: Weighted average cost of capital: $715,000 $13,450 10% Your firm's days sales outstanding (DSO) is Your boss is unhappy with your company's DSO and wants to bring it down to the industry average of 25 days. The marketing department told you that they expect sales to grow by 12% next year. This means that your company can expect to have an accounts receivable balance of next year.

4. Financial ratios in the forecasting process Your boss has asked you to take a closer look at your company's credit policies. You have been given the following information: Accounts receivable balance: Average daily sales: Weighted average cost of capital: $715,000 $13,450 10% Your firm's days sales outstanding (DSO) is Your boss is unhappy with your company's DSO and wants to bring it down to the industry average of 25 days. The marketing department told you that they expect sales to grow by 12% next year. This means that your company can expect to have an accounts receivable balance of next year.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Which one of the following statements is correct if a firm has a receivables turnover of 10? It takes the firm an average of 36.5 days to sell its items. The firm has ten times more in accounts receivable than it does in cash. The firm collects its credit sales in an average of 36.5 days. It takes the firm 10 days to collect payment from its customers.
please help with practice problems
A company currently has the following accounts: Cash: $7,000 Accounts Receivable (net): $11,000 Short-Term Investment: $3,000 Inventory: $3,000 Current Liabilities: $5,000 The company has just learned that a $4,000 accounts receivable will not be collectible. How will this change impact the current ratio? It will decrease from 4.8 to 4.0. It will increase from 4.2 to 5.0. It will decrease from 4.2 to 3.4. It will increase from 4.8 to 5.6.
Q2. A company currently has annual sales of Rs. 500,000 and an average collection period of 30 days. It is considering a more liberal credit policy. If the credit period is extended, the company expects sales and bad-debt losses to increase in following manner: Credit policy А Increase in credit period Increase in sale (Rs) Bad debts % of total sales 25,000 1.2 35,000 1.5 40,000 1.8 50,000 ABCDE 10 days 15 30 42 2.2 The selling price per unit is Rs 2. Average cost per unit at the current level of operations is Rs. 1.50 and variable cost per unit is Rs. 1.20. if current bad debt loss is 1% and required rate of return on investment is 20%, which credit policy should be undertaken? Ignore taxes and assume 360 days in a year.
Consider a bank with return on assets of .15 or 15%. The equity multiplier for this bank is 1.333. What is the return on equity of this bank?
Which of the following is the most correct? A. In reference to the time value of money, the present value is always labeled as t=1 B. Negative MVAs indicate that a company's executives are managing the expenses well C. Nominal rates, or annual percentage rates, always equal the effective annual rate D. A strong ROE always indicates a strong year for a company E. Firms should generally try to minimize their days' sales outstanding in order to access their receivables at fast rates.
You are considering investing in Dakota's Security Services. You have been able to locate the following information on the firm: Total assets are $32.6 million, accounts receivable are $4.46 million, ACP is 25 days, net income is $4.83 million, and debt-to-equity is 1.3 times. All sales are on credit. Dakota's is considering loosening its credit policy such that ACP will increase to 30 days. The change is expected to increase credit sales by 6 percent. Any change in accounts receivable will be offset with a change in debt. No other balance sheet changes are expected. Dakota's profit margin will remain unchanged. How will this change in accounts receivable policy affect Dakota's net income, total asset turnover, equity multiplier, ROA, and ROE? Note: Do not round intermediate calculations. Enter your answer in millions of dollars. Round your answers to 2 decimal places. Use 365 days a year. Net income Total asset turnover Equity multiplier ROA ROE million times times % %
Your company received a $7 million order on the last day of the year. You filled the order with $3 million worth of inventory. The customer picks up the order the same day and pays $2 million up front in cash; you also issue a bill for the customer to pay the remaining balance of $5 million within 40 days. Suppose your firm’s tax rate is 0% (ignore taxes). Based on this information, complete the table below: Account Account Increase/Decrease/ No effect Value of effect ($) Revenues Earnings Receivables Inventory Cash