Which of the following statements is most correct? Select the correct response: A firm that makes 90 percent of its sales on credit and 10 percent for cash is growing at a rate of 10 percent annually. If the firm maintains O stable growth it will also be able to maintain its accounts receivable at its current level, since the 10 percent cash sales can be used to manage the 10 percent growth rate. If a firm has a large percentage of accounts over 30 days old, it is a sign that the firm's receivables management needs to be reviewed and improved. Since receivables and payables both result from sales transactions, a firm with a high receivables-to-sales ratio should also have a high payables-to-sales ratio. In managing a firm's accounts receivable it is possible to increase credit sales per day yet still keep accounts receivable fairly steady if the firm can shorten the length of its collection period.

Which of the following statements is most correct? Select the correct response: A firm that makes 90 percent of its sales on credit and 10 percent for cash is growing at a rate of 10 percent annually. If the firm maintains O stable growth it will also be able to maintain its accounts receivable at its current level, since the 10 percent cash sales can be used to manage the 10 percent growth rate. If a firm has a large percentage of accounts over 30 days old, it is a sign that the firm's receivables management needs to be reviewed and improved. Since receivables and payables both result from sales transactions, a firm with a high receivables-to-sales ratio should also have a high payables-to-sales ratio. In managing a firm's accounts receivable it is possible to increase credit sales per day yet still keep accounts receivable fairly steady if the firm can shorten the length of its collection period.

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Scenarios: You work in the macroeconomic research department of an investment bank. Based on your modelling of the economy, you think that in the next few months US GDP will evolve according to three basic scenarios: Scenario A: GDP will rise 3%. This will send the S&P ETF to 414. Scenario B: GDP will stagnate. S&P ETF will stay at 407. Scenario C: GDP will fall 2%. This will send the S&P ETF to 400. Question 1: Compute the payoff and net payoff of a bear spread strategy built with put options in the three scenarios above. The put options should have strikes 405 and 409 and mature in February. Draw the profile of the bear spread strategy. Use the data in Table 2. Please show your calculations. Discuss your result.
Scenarios: You work in the macroeconomic research department of an investment bank. Based on your modelling of the economy, you think that in the next few months US GDP will evolve according to three basic scenarios: Scenario A: GDP will rise 3%. This will send the S&P ETF to 414. Scenario B: GDP will stagnate. S&P ETF will stay at 407. Scenario C: GDP will fall 2%. This will send the S&P ETF to 400. Question 3 You build an “Iron Condor” strategy with February maturity combining the following positions: a long put at 405 a short put at 406 a short call at 408 a long call at 409 Draw the payoff and net payoff of the Iron Condor strategy. Compute the payoff and net payoff of this strategy in the three scenarios. Use the data in Table 2. Please show your calculations. Discuss your result.
Daniel Sawyer, the CEO of the Sawyer Group, is initiating planning for the company's operations next year, and he wants you to forecast the firm's additional funds needed (AFN). The firm is operating at full capacity. Data for use in your forecast are shown below. Based on the AFN equation, what is the AFN for the coming year? Dollars are in millions. Last year's sales = S0 $350 Last year's accounts payable $40 Sales growth rate = g 30% Last year's notes payable $50 Last year's total assets = A0* $320 Last year's accruals $30 Last year's profit margin = PM 5% Target payout ratio 60% Select the correct answer. a. $69.3 b. $72.7 c. $62.5 d. $65.9 e. $76.1
In this exercise, we develop a model for the growth rate G, in thousands of dollars per year, in sales of a product as a function of the sales level s, in thousands of dollars.† The model assumes that there is a limit to the total amount of sales that can be attained. In this situation, we use the term unattained sales for the difference between this limit and the current sales level. For example, if we expect sales to grow to 4 thousand dollars in the long run, then 4 − s gives the unattained sales. The model states that the growth rate G is proportional to the product of the sales level s and the unattained sales. Assume that the constant of proportionality is 0.8 and that the sales grow to 2 thousand dollars in the long run. (a) Find a formula for unattained sales.(b) Write an equation that shows the proportionality relation for G.G =
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A firm is considering several policy changes to increase sales. It will increase inventory by $10,000 it will offer more liberal sales terms but will result in average receivables increasing by $65,000. These actions are expected to increase sales by $800,000 per year, and cost of goods will remain at 80% of sales. Because of the firm’s increased purchase of its won production needs, average payable increases by $35,000.What factors should they consider when making these decisions? What effects would they have on the firm’s cash cycle? Please select three financial ratios they should consider and why
Appalachian Registers, Inc. (ARI) has current sales of $50 million. Sales are expected to grow to $70 million next year. ARI currently has accounts receivable of $9 million, inventories of $15 million, and net fixed assets of $18 million. These assets are expected to grow at the same rate as sales over the next year. Accounts payable are expected to increase from their current level of $14 million to a new level of $18 million next year. ARI wants to increase its cash balance at the end of next year by $2 million over its current cash balances, which average $4 million. Earnings after taxes next year are forecasted to be $10 million. Next year, ARI plans to pay dividends of $2 million, up from $500,000 this year. ARI's marginal tax rate is 34 percent. How much external financing is required by ARI next year? Enter your answer in millions. For example, an answer of $1.2 million should be entered as 1.2, not 1,200,000. Round your answer to two decimal places. $ million
If average daily remittances are $1 million, and extended disbursement float adds 12 days to the disbursement schedule, how much should the firm be willing to pay for a cash management system if the firm earns 15% on excess funds?
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 % %

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