FOUNDATIONS OF FINANCE- MYFINANCELAB
FOUNDATIONS OF FINANCE- MYFINANCELAB
10th Edition
ISBN: 9780135160572
Author: KEOWN
Publisher: PEARSON
Textbook Question
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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.

  1. a. If Tabor’s accounts receivable are $562,500, what is its average collection period?
  2. b. If Tabor reduces its days in receivable (average collection period) to 20 days, what will be its new level of accounts receivable?
  3. c. Tabor’s inventory turnover ratio is 9 times. What is the level of Tabor’s inventories?
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The time value of money concept is based on the idea that: a) Money loses value over time.b) A dollar today is worth more than a dollar tomorrow.c) Future money is worth more than present money.d) Inflation has no effect on money.
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