??!! Gerald Books Ltd. currently has $720,000 in accounts receivable andgenerated $5,600,000 in sales (all on credit) during the year that justended. The firm's days sales outstanding (DSO) is how many days? Use365 days as the length of a year in all calculations.Gerald Books Ltd.'s CFO is unhappy with its DSO and wants to improvecollections next year. Sales are expected to grow by 10% next year,and the CFO wants to lower the DSO to the industry average of 28 days.How much accounts receivable is the firm expected to carry next year?

Explanation of Days Sales Outstanding (DSO): Days Sales Outstanding, commonly abbreviated as DSO, is…

Answered: Gerald Books Ltd. currently has…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter3: Evaluation Of Financial Performance

Section: Chapter Questions

Problem 3P

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The Raattama Corporation had sales of $3.5 million last year, and it earned a 5% return (after taxes) on sales. Recently, the company has fallen behind in its accounts payable. Although its terms of purchase are net 30 days, its accounts payable represents 60 days’ purchases. The company’s treasurer is seeking to increase bank borrowing in order to become current in meeting its trade obligations (that is, to have 30 days’ payables outstanding). The company’s balance sheet is as follows (in thousands of dollars): How much bank financing is needed to eliminate the past-due accounts payable? Assume that the bank will lend the firm the amount calculated in part a. The terms of the loan offered are 8%, simple interest, and the bank uses a 360-day year for the interest calculation. What is the interest charge for 1 month? (Assume there are 30 days in a month.) Now ignore part b and assume that the bank will lend the firm the amount calculated in part a. The terms of the loan are 7.5%, add-on interest, to be repaid in 12 monthly installments. What is the total loan amount? What are the monthly installments? What is the APR of the loan? What is the effective rate of the loan? Would you, as a bank loan officer, make this loan? Why or why not?
Strickler Technology is considering changes in its working capital policies to improve its cash flow cycle. Stricklers sales last year were 3,250,000 (all on credit), and its net profit margin was 7%. Its inventory turnover was 6.0 times during the year, and its DSO was 41 days. Its annual cost of goods sold was 1,800,000. The firm had fixed assets totaling 535,000. Stricklers payables deferral period is 45 days. a. Calculate Stricklers cash conversion cycle. b. Assuming Strickler holds negligible amounts of cash and marketable securities, calculate its total assets turnover and ROA. c. Suppose Stricklers managers believe the annual inventory turnover can be raised to 9 times without affecting sale or profit margins. What would Stricklers cash conversion cycle, total assets turnover, and ROA have been if the inventory turnover had been 9 for the year?
Atlantic Northern Inc. currently has $715,000 in accounts receivable and generated $4,650,000 in sales (all on credit) during the year that just ended. The firm’s days sales outstanding (DSO) is days. Use 365 days as the length of a year in all calculations. Atlantic Northern Inc.’s CFO is unhappy with its DSO and wants to improve collections next year. Sales are expected to grow by 13% next year, and the CFO wants to lower the DSO to the industry average of 30 days. How much accounts receivable is the firm expected to carry? $453,471 $431,877 $410,283 $388,689
Data on Nathan Enterprises for the most recent year are shown below, along with the days sales outstanding of the firms against which it benchmarks. The firm's new CFO believes that the company could reduce its receivables enough to reduce its DSO to the benchmarks' average. If this were done, by how much would receivables decline? Use a 365-day year. Sales $110,000 Accounts receivable $16,000 Days sales outstanding (DSO) 53.09 Benchmark days sales outstanding (DSO) 20.00 a. $9,973 b. $8,078 c. $8,975 d. $10,970 e. $12,067
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Sunland Corp had sales of $389,000 in 2017. If management expects its sales to be $476,450 in 4 years, what is the rate at which the company’s sales are expected to grow? (If you solve this problem with algebra round intermediate calculations to 4 decimal places, in all cases round your final answer to 2 decimal places, e.g. 8.72%.) Growth rate %
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