1.  Inventory Management
Williams & Sons last year reported sales of $145 million,cost of goods sold (COGS) of $120 and an inventory turnover ratioof 5. The company is now adopting a new inventory system. If thenew system is able to reduce the firm's inventory level andincrease the firm's inventory turnover ratio to 8 while maintainingthe same level of sales and COGS, how much cash will be freed up?Do not round intermediate calculations. Round your answer to thenearest dollar.
ANSWER: $Â Â
2. Receivables Investment
Medwig Corporation has a DSO of 37 days. The company averages$4,250 in sales each day (all customers take credit). What is thecompany's average accounts receivable? Round your answer to thenearest dollar.
ANSWER: $
3. Cost of Trade Credit
What are the nominal and effective costs of trade credit underthe credit terms of 1/20, net 30? Assume 365 days in a year foryour calculations. Round your answers to two decimal places. Do notround intermediate calculations.
ANSWER: (percentages)
Nominal cost of trade credit:
Effective cost of trade credit:
4. Cost of Trade Credit
A large retailer obtains merchandise under the credit terms of3/20, net 30, but routinely takes 65 days to pay its bills.(Because the retailer is an important customer, suppliers allow thefirm to stretch its credit terms.) What is the retailer's effectivecost of trade credit? Assume 365 days in year for yourcalculations. Do not round intermediate calculations. Round youranswer to two decimal places.
ANSWER: (percentage)
5. Accounts Payable
A chain of appliance stores, APP Corporation, purchasesinventory with a net price of $250,000 each day. The companypurchases the inventory under the credit terms of 2/15, net 40. APPalways takes the discount, but takes the full 15 days to pay itsbills. What is the average accounts payable for APP? Round youranswer to the nearest dollar.
ANSWER: $
