Finance Question
Chapter 15: P1
1 Pretty Lady Cosmetic Products has an
average production process time of 40 days. Finished goods are kept on hand for
an average of 15 days before they are sold. Accounts receivable are outstanding
an average of 35 days, and the firm receives 40 days of credit on its purchases
from suppliers.
- Estimate the average length of the
firm’s short-term operating cycle. How often would the cycle turn over in
a year?
- 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: P1
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 60 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.
