FIN 100 Week 9 Homework Chapter 15 and 16
Chapter 15 Problem 1: Pretty Lady Cosmetic Products has an average production process time of 40-days. Finished goods are ….on hand for an average of 15-days before they are …. Accounts receivable are outstanding an average of 35-days, and the firm receives 40-days credit on its purchases from suppliers.
a. Estimate the average length of the firm’s short-term operating cycle. How often would the cycle turn over in a year?
b. Assume net sales of $1,200,000 and cost of goods sold of $900,000. Determine the average investment in accounts receivable, inventories, and accounts payable. What would be the net financing need considering only these three accounts?
Chapter 16 Problem 1: A supplier is offering your firm a cash discount of 2 percent if purchases are paid for within ten days; otherwise, the bill is due at the end of sixty days. Would you recommend borrowing from a bank at an 18 percent annual interest rate to take advantage of the cash discount offer? Explain your answer.