Questions from Financial Management

Q: Titusville Petroleum Company is considering pledging its receivables to finance an increase

Titusville Petroleum Company is considering pledging its receivables to finance an increase in working capital. Citizens National Bank will lend the company 80 percent of the pledged receivables at 2...

Q: DuBois Apparel Company is considering factoring its receivables. The company’s average

DuBois Apparel Company is considering factoring its receivables. The company’s average level of receivables is $1.5 million, and its average collection period is 45 days. DuBois’s bad-debt losses aver...

Q: The Clearfield Company would be permitted to borrow up to $750

The Clearfield Company would be permitted to borrow up to $750,000 secured by inventories under a field warehouse arrangement with a sales finance company. The annual interest rate would be 12 percent...

Q: Dexter Instrument Company’s sales average $3 million per day.

Dexter Instrument Company’s sales average $3 million per day. a. If Dexter could reduce the time between customers’ mailing their payments and the funds becoming collected balances by 2.5 days, what...

Q: Exman Company performed a study of its billing and collection procedures and

Exman Company performed a study of its billing and collection procedures and found that an average of 8 days elapses between the time when a customer’s payment is received and when the funds become us...

Q: Great Lakes Oil Company currently processes all its credit card payments at

Great Lakes Oil Company currently processes all its credit card payments at its domestic headquarters in Chicago. The firm is considering establishing a lockbox arrangement with a Los Angeles bank to...

Q: Japanese Motors, a major importer of foreign automobiles, has a

Japanese Motors, a major importer of foreign automobiles, has a subsidiary (Japanese Motor Credit Company, or JMCC) that finances dealer inventories, as well as retail installment purchases of the com...

Q: Disher Cotton Farms is a large cotton producer located near Lubbock,

Disher Cotton Farms is a large cotton producer located near Lubbock, Texas. Each year Disher plants its fields in cotton and then waits until the fall before the cotton is picked and sold. Disher know...

Q: J-Mart, a nationwide department store chain, processes all

J-Mart, a nationwide department store chain, processes all its credit sales payments at its suburban Detroit headquarters. The firm is considering the implementation of a lockbox collection system wit...

Q: Peterson Electronics uses a decentralized collection system whereby customers mail their payments

Peterson Electronics uses a decentralized collection system whereby customers mail their payments to one of six regional collection centers. The checks are deposited each working day in the collection...