Foundations Of Finance
10th Edition
ISBN: 9780134897264
Author: KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher: Pearson,
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Textbook Question
Chapter 4, Problem 8SP
(Evaluating liquidity) The Tabor Sales Company had a gross profit margin (gross profits ÷ sales) of 30 percent and sales of $9 million last year. Seventy-five percent of the firm’s sales are on credit and the remainder are cash sales. Tabor current assets equal $1.5 million, its current liabilities equal $300,000, and it has $100,000 in cash plus marketable securities.
- a. If Tabor’s accounts receivable are $562,500, what is its average collection period?
- b. If Tabor reduces its days in receivable (average collection period) to 20 days, what will be its new level of accounts receivable?
- c. Tabor’s inventory turnover ratio is 9 times. What is the level of Tabor’s inventories?
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The Brenmar Sales Company had a gross profit margin (gross
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percent and sales of
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73
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$109,000
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a. If Brenmar's accounts receivable equal
$562,900,
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25
days, what will be its new level of accounts receivable?
c. Brenmar's inventory turnover ratio is
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times. What is the level of Brenmar's inventories?
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profits÷sales)
of
34
percent and sales of
$8.3
million last year.
79
percent of the firm's sales are on credit, and the remainder are cash sales. Brenmar's current assets equal
$1.5
million, its current liabilities equal
a. If Brenmar's accounts receivable equal
$563,000,
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b. If Brenmar reduces its average collection period to
25
days, what will be its new level of accounts receivable?
c. Brenmar's inventory turnover ratio is
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$303,100,
and it has
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in cash plus marketable securities.
Mandesa, Inc has current liabilities of $8 million, current ratio of 2 times inventory turnover of 12 times, average collection period of 30 days, and credit sales of $64million. Calculate the value of cash and marketable securities.
Chapter 4 Solutions
Foundations Of Finance
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