Solve these accounting question not use ai A firm offers terms of 3/35, net 50. Currently, two-thirdsof all customers take advantage of the trade discount;the remainder pay bills at the due date.a. What will be the firm's typical value for its accountsreceivable period?(Do not round intermediate calculations.)b. What is the average investment in accounts receivableif annual sales are $20 million?(Use 365 days in a year. Do not round intermediatecalculations. Enter your answer in millions rounded to 3decimal places.)

Step 1: Define Receivables TurnoverThe receivables turnover ratio is a measure of the number of…

Answered: A firm offers terms of 3/35, net 50.…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter18: The Management Of Accounts Receivable And Inventories

Section: Chapter Questions

Problem 10QTD

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If a firm buys under terms of 1/15, net 40, but actually pays on the 20th day and still takes the discount, what is the nominal cost of its nonfree trade credit? Assume a 365-day year. Do not round intermediate calculations. Round your answer to two decimal places.
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A firm sells its accounts receivables to a factor at a 3.5% discount. The average collection period is 3 month. a. What is the effective annual interest rate on this arrangement? (Round your answer to 2 decimal places.) b. What is the implicit effective annual interest rate if the average collection period is 5 months? (Round your answer to 2 decimal places.)
Suppose your Visa credit card charges an APR of 13.5%, compounded monthly and your current statement shows a balance of $758.50.a) If you make no payments and no additional purchases for one year, what will bethe amount owed at the end of that year?b) How much total interest will be paid?c) What is the nominal rate?d) What is the effective annual rate (EAR)?e) Suppose this credit card company requires a minimum monthly payment of $25.Assuming that no additional purchases are made and also assuming that this minimum amount is paid every month, prepare an amortization schedule for the first three months of payments.
What’s the equivalent interest rate to the terms 3/20, n/60? In other words, what is the effective annual rate that is "given" to a customer for this cash discount? (Use 365 days.) HINT: Use the I = P x R x T formula where R = I/PT and choose some value for the gross amount of the invoice (i.e $1,000). Label (%) and round to the nearest whole percent.
A credit card company charges 23.0% interest per year, compounded monthly. What effective annual interest rate does the company charge? Note: The effective annual interest rate is the return on an investment or the rate owed in interest on a loan when compounding is taken into account. O 25.71% 25.22% 25.59% O24.95% G
Simmons Corporation can borrow from its bank at 21 percent to take a cash discount. The terms of the cash discount are 2.5/18, net 55. a. Compute the cost of not taking the cash discount. Note: Use a 360-day year. Do not round intermediate calculations. Input your final answer as a percent rounded to 2 decimal places. Cost of not taking a cash discount b. Should the firm borrow the funds? O No O Yes %
Suppose a firm makes purchases of $3.65 million per year under terms of 2/10, net 30, and takes discounts. What is the average amount of accounts payable net of discounts? (Assume the $3.65 million of purchases is net of discounts—that is, gross purchases are $3,724,489.80, discounts are $74,489.80, and net purchases are $3.65 million.) Is there a cost of the trade credit the firm uses? If the firm did not take discounts but did pay on the due date, what would be its average payables and the nominal and effective costs of this nonfree trade credit? What would be the firm’s nominal and effective costs of not taking discounts if it could stretch its payments to 40 days?
Suppose your credit card issuer states that it charges a 24.00% nominal annual rate, but you must make monthly payments, which amounts to monthly compounding. What is the effective annual rate? O a. 26.29% b. 31.12% O c. 29.51% d. 26.82% e. 21.19%
The following information was extracted from ABC Ltd’s financial statements for the year ended 31 December 2019. Sales on 30 November 2019 were K100 million and K110 million on 31 December 2019. For the year 2020, sales are expected to double at a constant monthly rate. 80% of the sales made are on account; the remainder on cash. From past experience, 5% of the receivables have turned out to be irrecoverable. Credit customers pay as follows: 75% in the month following the sale; 15% two months after the sale month. Inventory levels are maintained at 20% of the following month’s sales. Accounts payables are at settled at 30 days after purchase. Required: Prepare a cash forecast for the three-month period from January to March 2020.
The following information was extracted from ABC Ltd’s financial statements for the year ended 31 December 2019. Sales on 30 November 2019 were K100 million and K110 million on 31 December 2019. For the year 2020, sales are expected to double at a constant monthly rate. 80% of the sales made are on account; the remainder on cash. From past experience, 5% of the receivables have turned out to be irrecoverable. Credit customers pay as follows: 75% in the month following the sale; 15% two months after the sale month. Inventory levels are maintained at 20% of the following month’s sales. Accounts payables are at settled at 30 days after purchase. Required: Prepare a collections schedule for the three-month period from January to March 2020.
Your company forecasts that next year's sales will be $78.00 million and the Days Sales Outstanding (DSO) ratio will be 24.84. What is the forecasted accounts receivable for next year? Note: your answer should in millions of dollars..

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