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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he Brenmar Sales Company had a gross profit margin (gross
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,
what is its average collection period?
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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times. What is the level of Brenmar's inventories?
$303,100,
and it has
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profits÷sales)
of
34
percent and sales of
$9.2
million last year.
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percent of the firm's sales are on credit, and the remainder are cash sales. Brenmar's current assets equal
$1.2
million, its current liabilities equal
$300,700,
and it has
$109,000
in cash plus marketable securities.
a. If Brenmar's accounts receivable equal
$562,900,
what is its average collection period?
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
9.3
times. What is the level of Brenmar's inventories?
A firm has the following accounts; current liabilities = $30,000,000, sales = $245,000,000. The firm has the following ratios;
current ratio = 1.76 times, inventory turnover ratio = 15.5 times, average collection period = 45 days. What is the value of the
firm's cash?
O $52,800,000
$6,788,069
O $9,378,078
O $31,549,104
Chapter 4 Solutions
Foundations Of Finance
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