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    Working Capital Management Exercise 1

    Uploaded by

    Nikki San Gabriel
    The document contains 14 multiple choice questions related to accounting concepts such as accounts receivable, accounts payable, cash flows, and credit terms. It provides relevant financial information for each question such as sales amounts, payment terms, interest rates, and time periods. The questions assess understanding of calculating cash flows, determining average balances, evaluating changes in credit policies, and analyzing the impact of collection procedures on costs and profits.

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    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd

    Working Capital Management Exercise 1

    Uploaded by

    Nikki San Gabriel
    35 views4 pages
    The document contains 14 multiple choice questions related to accounting concepts such as accounts receivable, accounts payable, cash flows, and credit terms. It provides relevant financial information for each question such as sales amounts, payment terms, interest rates, and time periods. The questions assess understanding of calculating cash flows, determining average balances, evaluating changes in credit policies, and analyzing the impact of collection procedures on costs and profits.

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    Working-Capital-Management-Exercise-1

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    The document contains 14 multiple choice questions related to accounting concepts such as accounts receivable, accounts payable, cash flows, and credit terms. It provides relevant financial information for each question such as sales amounts, payment terms, interest rates, and time periods. The questions assess understanding of calculating cash flows, determining average balances, evaluating changes in credit policies, and analyzing the impact of collection procedures on costs and profits.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    35 views4 pages

    Working Capital Management Exercise 1

    Uploaded by

    Nikki San Gabriel
    The document contains 14 multiple choice questions related to accounting concepts such as accounts receivable, accounts payable, cash flows, and credit terms. It provides relevant financial information for each question such as sales amounts, payment terms, interest rates, and time periods. The questions assess understanding of calculating cash flows, determining average balances, evaluating changes in credit policies, and analyzing the impact of collection procedures on costs and profits.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    of 4

    Question 1.

    1.5 million (300k) = 1.2 million

    Question 2.

    Question 3

    Question 4
    Question 5
    The following data pertains to HAHN Corp:
    HAHN Corp’s payment to suppliers HAHN Corp’s collection from customers
    (In number of days) (In number of days)
    Mail time 4 Mail time 3
    Processing delay 3 Processing delay 2
    Clearing delay 1 Clearing delay 1
    HAHN Corp’s daily payments average P1 000; daily collections average P1 500.
    1. How much is the average daily disbursement float? 1k*8= 8,000
    2. How much is the average daily collection float? 1500*6=9,000
    3. How much is the net float? 8,000-9,000= (1,000)

    Question 6 (Research your answer)

    Question 7

    90M/365= 246575
    *3 days
    = 739726 * .08
    savings = 59178
    cot (80000)
    loss = 20822
    Question 8

    2500*300= 750000

    90000/8%= 1125000
    1125000/ 750000= 1.5
    Question 9

    Question 10

    Diane Corp sells on terms 3/5, net 20. Sales for the year total P912,500. Forty percent pay on the fifth
    day and take discounts; the other 60% pay on average 40 days after purchases. What is the average
    amount of accounts receivable? (365 days / year). 912500/365= 2500

    Question 11 40%* 5= 2 + (60%*40=24) =26


    2500*26= 65,000
    MIA Co. is considering changing its credit terms from 2/15, n/30 to 3/10, n/30 in order to speed up
    collections. At present, 40% of MIA Co.’s customers take the 2% discount. Under the new term, discount
    customers are expected to rise to 50%. Regardless of the credit terms, half of the customers who do not
    take the discount are expected to pay on time, whereas the remainder will pay 10 days late. The change
    does not involve a relaxation of credit standards; therefore, bad debt losses (per peso sales) will remain
    at status quo.

    Currently bad debts expense is 2% of sales. However, the more generous cash discount terms are
    expected to increase sales from P2 000 000 to P2 600 000 per year. MIA Co.’s variable cost ratio is 75%,
    the interest rate on funds invested in accounts receivable is 9%, and the firm’s income tax rate is 40%.
    (360 days/year) What is the incremental after-tax profit from the change in credit terms? 68494

    Question 12

    KATE Co. is planning to introduce changes in its collection procedures. The new procedures are expected
    to make the collection period longer by 10 days, although there will be no change in bad debts. For the
    coming year, KATE Co.’s budgeted sales is P32 400 000 or P90 000 per day. Short-term interest rates are
    expected to average at 9% per annum.
    1. As a result of the changes in collection procedures, KATE Co.’s average AR balance will increase
    (decrease) by? 90000*10 days = 900000
    2. To make the changes in collection procedures cost-beneficial, the minimum savings in collection costs
    for the coming year should be? 900000*9%= 81000
    Question 13

    Question 14

    720000
    720000*80%= (576000)
    = 144000
    120329 Carrying cost= (23671) = 720k/365 *80% * 20%
    = 120329

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