Questions from Financial Management

Q: Williams & Sons last year reported sales of $10 million and

Williams & Sons last year reported sales of $10 million and an inventory turnover ratio of 2. The company is now adopting a new inventory system. If the new system is able to reduce the firm’s invento...

Q: What is the nominal and effective cost of trade credit under the

What is the nominal and effective cost of trade credit under the credit terms of 3/15, net 30?

Q: Snider Industries sells on terms of 2/10, net 45

Snider Industries sells on terms of 2/10, net 45. Total sales for the year are $1,500,000. Thirty percent of customers pay on the 10th day and take discounts; the other 70% pay, on average, 50 days af...

Q: a. If a firm buys under terms of 3/15

a. If a firm buys under terms of 3/15, net 45, but actually pays on the 20th day and still takes the discount, what is the nominal cost of its nonfree trade credit? b. Does it receive more or less cre...

Q: What types of risks are interest-rate and exchange rate swaps

What types of risks are interest-rate and exchange rate swaps designed to mitigate? Why might one company prefer fixed-rate payments while another company prefers floating-rate payments, or payments i...

Q: Grunewald Industries sells on terms of 2/10, net 40

Grunewald Industries sells on terms of 2/10, net 40. Gross sales last year were $4,562,500 and accounts receivable averaged $437,500. Half of Grunewald’s customers paid on the 10th day and took discou...

Q: Negus Enterprises has an inventory conversion period of 50 days, an

Negus Enterprises has an inventory conversion period of 50 days, an average collection period of 35 days, and a payables deferral period of 25 days. Assume that cost of goods sold is 80% of sales. a....

Q: Strickler Technology is considering changes in its working capital policies to improve

Strickler Technology is considering changes in its working capital policies to improve its cash flow cycle. Strickler’ss sales last year were $3,250,000 (all on credit), and its net profit margin was...

Q: Payne Products had $1.6 million in sales revenues in

Payne Products had $1.6 million in sales revenues in the most recent year and expects sales growth to be 25% this year. Payne would like to determine the effect of various current assets policies on i...

Q: Dorothy Koehl recently leased space in the Southside Mall and opened a

Dorothy Koehl recently leased space in the Southside Mall and opened a new business, Koehl’s Doll Shop. Business has been good, but Koehl frequently runs out of cash. This has necess...