Problem 4-15Lloyd Inc. has sales of $200,000, a net income of $15,000, and the following balance sheet:ASSETSCashReceivablesInventoriesTotal Current assetsNet fixed assetsTotal assetsAMOUNT LIABILITIES & EQUITY$10,000 Accounts Payables50,000 Notes Payable to bank150,000 Total current liabilities$210,000 Long-term debt90,000 Common Equity$300,000 Total Liabilities and EquityAMOUNT$30,00020,000$50,00050,000200,000$300,000The new owner thinks that inventories are excessive and can be lowered to the point where the current ratio is equal to the industry average, 2.53, without affecting sales or net income. Ifinventories are sold and not replaced (thus reducing the current ratio to 2.53), if the funds generated are used to reduce common equity (stock can be repurchased at book value), and if noother changes occur, by how much will the ROE change? What will be the firm's new quick ratio?Problem 4-1Baxley Brothers has a DSO of 23 days, and its annual sales are $3,650,000. What is its accounts receivable balance? Assume that it uses a 365-day year.Upload this assignment in a *.pdf format

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Problem 4-1 Baxley Brothers has a DSO of 23 days, and its annual sales are $3,650,000. What is its accounts receivable balance? Assume that uses a 365-day year. Upload this assignment in a ".pdf format

Problem 4-1 Baxley Brothers has a DSO of 23 days, and its annual sales are $3,650,000. What is its accounts receivable balance? Assume that uses a 365-day year. Upload this assignment in a ".pdf format

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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Concept explainers

Conversion Cycle

Conversion cycle is also known as cash cycle or net operating cycle. Conversion cycle refers to how much time a company takes to turn its investments which is done from stock or any other financial resources into cash flows from sales.

Question

Problem 4-15
Lloyd Inc. has sales of $200,000, a net income of $15,000, and the following balance sheet:
ASSETS
Cash
Receivables
Inventories
Total Current assets
Net fixed assets
Total assets
AMOUNT LIABILITIES & EQUITY
$10,000 Accounts Payables
50,000 Notes Payable to bank
150,000 Total current liabilities
$210,000 Long-term debt
90,000 Common Equity
$300,000 Total Liabilities and Equity
AMOUNT
$30,000
20,000
$50,000
50,000
200,000
$300,000
The new owner thinks that inventories are excessive and can be lowered to the point where the current ratio is equal to the industry average, 2.53, without affecting sales or net income. If
inventories are sold and not replaced (thus reducing the current ratio to 2.53), if the funds generated are used to reduce common equity (stock can be repurchased at book value), and if no
other changes occur, by how much will the ROE change? What will be the firm's new quick ratio?
Problem 4-1
Baxley Brothers has a DSO of 23 days, and its annual sales are $3,650,000. What is its accounts receivable balance? Assume that it uses a 365-day year.
Upload this assignment in a *.pdf format

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Calculate the average daily balance (in $) for October for a revolving credit account with a previous month's balance of $130 and the following activity. (Round your answer to the nearest cent.) Date Activity Amount October 3 Cash advance $50.00 October 7 Payment $75.00 October 10 Purchase $28.59 October 16 Credit $20.00 October 25 Purchase $122.60 average daily balance = $ ___
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K Accounts receivable management This table, shows that Blair Supply had an end-of-year accounts receivable balance of $300,000. The table also shows how much of the receivables balance originated in each of the previous six months. The company had annual sales of $2.40 million and it normally extends 30-day credit terms to its customers. a. Use the year-end total to evaluate the firm's collection system. b. If 70% of the firm's sales occur between July and December, would this affect the validity of your conclusion in part a? Explain. a. The average collection period is days. (Round to two decimal places.)
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