Foundations of Financial Management
16th Edition
ISBN: 9781259277160
Author: Stanley B. Block, Geoffrey A. Hirt, Bartley Danielsen
Publisher: McGraw-Hill Education
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Textbook Question
Chapter 7, Problem 11P
Route Canal Shipping Company has the following schedule for aging of accounts receivable:
a. Fill in column (4) for each month.
b. If the firm had
c. If the firm likes to see its bills collected in 35 days, should it be satisfied with the average collection period?
d. Disregarding your answer to part c and considering the aging schedule for accounts receivable, should the company be satisfied?
e. What additional information does the aging schedule bring to the company that the average collection period may not show?
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Route Canal Shipping Company has the following schedule for aging of accounts receivable:
Age of Receivables
April 30, 20X1
(3)
(2)
Age of
Account
0-30
31-60
61-90
91-120
(1)
Month of
Sales
April
March
February
January
Total receivables
Month of Sales
April
March
a. Calculate the percentage of amount due for each month.
February
January
Amounts
$120,540
86,100
103,320
34,440
$344,400
Total receivables
Percent of
Amount Due
%
%
%
do
(4)
Percent of
Amount Due
%
100 %
100%
4. On average it takes Acme Tool Company 80 days to collect on its sales receivables, and its operating cycle is 290 days.
a. How long is cash typically tied up in inventories? (Show computations)
b. What would be the likely effect to Acme's operating cycle if the company changes its current policy that sales upon credit must be paid within 3 months, instead requiring payment within 2 months? (No calculations needed, just describe the likely effect on Acme's operating cycle.)
Solve this problem & give accurate answer
Chapter 7 Solutions
Foundations of Financial Management
Ch. 7 - Prob. 1DQCh. 7 - Prob. 2DQCh. 7 - Why would a financial manager want to slow down...Ch. 7 - Use The Wall Street Journal or some other...Ch. 7 - Why are Treasury bills a favorite place for...Ch. 7 - Explain why the bad debt percentage or any other...Ch. 7 - What are three quantitative measures that can be...Ch. 7 - Prob. 8DQCh. 7 - What does the EOQ formula tell us? What assumption...Ch. 7 - Why might a firm keep a safety stock? What effect...
Ch. 7 - If a firm uses a just-in-time inventory system,...Ch. 7 - City Farm Insurance has collection centers across...Ch. 7 - Prob. 2PCh. 7 - Orbital Communications has operating plants in...Ch. 7 - Postal Express has outlets throughout the world....Ch. 7 - Thompson Wood Products has credit sales of...Ch. 7 - Oral Roberts Dental Supplies has annual sales of...Ch. 7 - Knight Roundtable Co. has annual credit sales of...Ch. 7 - Darla’s Cosmetics has annual credit sales of...Ch. 7 - Barney’s Antique Shop has annual credit sales of...Ch. 7 - Mervyn’s Fine Fashions has an average collection...Ch. 7 - Route Canal Shipping Company has the following...Ch. 7 - Nowlin Pipe & Steel has projected sales of 72,000...Ch. 7 - Fisk Corporation is trying to improve its...Ch. 7 - Prob. 14PCh. 7 - Diagnostic Supplies has expected sales of 84,100...Ch. 7 - Wisconsin Snowmobile Corp. is considering a switch...Ch. 7 - Johnson Electronics is considering extending trade...Ch. 7 - Henderson Office Supply is considering a more...Ch. 7 - Fast Turnstiles Co. is evaluating the extension of...Ch. 7 - Slow Roll Drum Co. is evaluating the extension of...Ch. 7 - Global Services is considering a promotional...Ch. 7 - Problems 22-25 are a series and should be...Ch. 7 - Problems 22-25 are a series and should be...Ch. 7 - Problems 22-25 are a series and should be...Ch. 7 - Problems 22-25 are a series and should be...
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- The aging schedule of a firm shows that 40 percent of the receivables are collected in 18 days and the remaining 60 percent of the receivables are collected in 50 days. As a result, the firm's days sales outstanding (DSO) is _____.arrow_forwardABCD Corporation has credit sales of $10,290,000 and receivables of $1,560,000. Assume there are 365 days in a year. What is the receivables turnover? Round your answer to two decimal places. What is the average collection period (days sales outstanding)? Round your answer to the nearest whole number. days If the company offers credit terms of 45 days, are its receivables past due? Round your answer to the nearest whole number. Enter zero if the receivables are not past due. , it is days overdue.arrow_forwardTo increase its sales, a company decides to increase its credit terms from 15 to 30 days. What effect will this change in policy have on receivables turnover and days' sales uncollected?arrow_forward
- Dome Metals has credit sales of $342,000 yearly with credit terms of net 45 days, which is also the average collection period. Dome does not offer a discount for early payment, so its customers take the full 45 days to pay. a. What is the average receivables balance? (Use a 360-day year.)b. What is the receivables turnover? (Use a 360-day year.)arrow_forwardNeed help with this questionarrow_forwardABCD Corporation has credit sales of $10,960,000 and receivables of $1,260,000. Assume there are 365 days in a year. What is the receivables turnover? Round your answer to two decimal places. What is the average collection period (days sales outstanding)? Round your answer to the nearest whole number. days If the company offers credit terms of 30 days, are its receivables past due? Round your answer to the nearest whole number. Enter zero if the receivables are not past due. -Select-YesNoItem 3 , it is days overdue.arrow_forward
- McGriff Dog Food Company normally takes 30 days to pay for average daily credit purchases of $9,730. Its average daily sales are $10,010, and it collects accounts in 32 days. a. What is its net credit position? Net credit position b-1. If the firm extends its average payment period from 30 days to 37 days (and all else remains the same), what is the firm's new net credit position? (Negative amount should be indicated by a minus sign.) Net credit position b-2. Has the firm improved its cash flow? Yes Noarrow_forwardI Need help finding the number of days of sales.....arrow_forwardCalculating the Average Collection Period Trout Lumber Yard has a current accounts receivable balance of $527,164. Credit sales for the year just ended were $6,787,626. What is the receivables turnover? The days’ sales in receivables? How long did it take, on average, for credit customers to pay off their accounts during the past year?arrow_forward
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