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Chapter 3: Q5BP (page 221)
Thompson Wood Products has credit sales of \(2,160,000 and accounts receivable of \)288,000. Compute the value of the average collection period.
The average collection period will be 48 days.
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Question: Nowlin Pipe & Steel has projected sales of 72,000 pipes this year, an ordering cost of \(6 per order, and carrying costs of \)2.40 per pipe.
b. How many orders will be placed during the year?
What does LIBOR mean? Is LIBOR normally higher or lower than the U.S. prime interest rate?
Route Canal Shipping Company has the following schedule for aging of accounts receivable:
b. If the firm had $1,500,000 in credit sales over the four-month period, compute the average collection period. Average daily sales should be based on a 120-day period.
Explain how rapidly expanding sales can drain the cash resources of a firm.
Tobin Supplies Company expects sales next year to be \(500,000. Inventory and accounts receivable will increase \)90,000 to accommodate this sales level. The company has a steady profit margin of 12 percent with a 40 percent dividend pay-out. How much external financing will Tobin Supplies Company have to seek? Assume there is no increase in liabilities other than that which will occur with the external financing.
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