Financial Accounting Assume that your business resulted in $900,000 in sales last year. Year-endreceivables are $120,000. You are considering factoring the receivables to raisecash to help finance growth. The factor imposes a 6% discount and charges anadditional 1% for each expected 10-day average collection period over 30 days.If the $900,000 in sales last year were evenly distributed throughout the year,an average of $120,000 in receivables outstanding would imply what averagecollection period? Given the terms stated, what dollar amount would youexpect to receive for your receivables?

Average daily sales = $900,000 / 365 days= $2,465 per dayAverage collection period = Average…

Answered: Assume that your business resulted in…

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter22: Providing And Obtaining Credit

Section: Chapter Questions

Problem 2MC

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Assume that the operation of your business resulted in sales of $730,000 last year. Year-end receivables are $100,000. You are considering factoring the receivables to raise cash to help finance your ventures growth. The factor imposes a 7% discount and charges an additional 1% for each expected ten-day average collection period over thirty days. A. Estimate the dollar amount you would receive from the factor for your receivables if the collection period was thirty days or less. B. Estimate the dollar amount you would receive from the factor for your receivables if the average collection period was sixty days.
General Accounting
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Annual credit sales of Nadak Company total $240 million. The firm gives a 2% cash discount for payment within 10 days of the invoice date; 90% of Nadak's accounts receivable are paid within the discount period. Required: a. What is the total amount of cash discounts allowed in a year? b. Calculate the approximate annual rate of return on investment that Nadak Company's cash discount terms represent to customers who take the discount. (Assume a credit period of 30 days and 360-days year). Answer is complete but not entirely correct. $ a. Total amount b. ROI 4.32 37 million %
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Your company just recorded sales of $9 million for the last fiscal year. You expect sales to grow in real terms at 7% annual rate for the next three years. The inflation is expected to be 1% per year during the same period. The appropriate nominal discount rate is 9%. Assume that the first cash flow occurs exactly one year from today. (a) What are your expected sales revenue for the next three years, in nominal terms? Year 1: Year 2: Year 3: (b) What is the present value of your nominal sales revenue over the next three years? (c) What are your expected sales revenue for the next three years, in real terms? Year 1: Year 2: Year 3: (d) What is the present value of your real sales revenue over the next three years?
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