FM12 Ch 27 Toolkit - A 1 2 3 4 5 6 7 8 9 B C D E F G H...

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9/20/2006 Chapter 27. Tool Kit for Providing and Obtaining Credit In Chapter 22, we addressed the topic of working capital management with a brief discussion of trade credit. In this chapter, we extend those analyses to several more advanced issues, including monitoring the receivables position and the cost of short term bank loans. A B C D E F G H I 1 2 3 4 5 6 7 8 9
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Table 27-1 Hanover Company: Receivables Data for 2007 (Thousands of Dollars) Based on Quarterly Sales Data Based on Year-to-Date Sales Data Month (1) ADS (4) DSO (5) ADS (6) DSO (7) January $60 $54 February $60 $90 March $60 $102 $1.98 52 $1.98 52 April $60 $102 May $90 $129 June $120 $174 $2.97 59 $2.47 70 July $120 $198 August $90 $177 September $60 $132 $2.97 44 $2.64 50 October $60 $108 November $60 $102 December $60 $102 $1.98 52 $2.47 41 Table 27-2 Hanover Company: Quarterly Aging Schedules for 2007 (Thousands of Dollars) Age of Accounts Value and Percentage of Total Accounts Receivable at the End of Each Quarter (Days) 31-Mar 30-Jun 30-Sep 31-Dec 0-30 $54 53% $108 62% $54 41% $54 53% 31-60 $36 35% $54 31% $54 41% $36 35% 61-90 $12 12% $12 7% $24 18% $12 12% $102 100% $174 100% $132 100% $102 100% Table 27-3 Hanover Company: Quarterly Uncollected Balances Schedules for 2007 (Thousands of Dollars) Quarter Monthly Sales Quarter 1: January $60 $12 20% February $60 $36 60% March $60 $54 90% $102 170% Quarter 2: April $60 $12 20% May $90 $54 60% June $120 $108 90% $174 170% Quarter 3: July $120 $24 20% August $90 $54 60% September $60 $54 90% $132 170% Quarter 4: October $60 $12 20% November $60 $36 60% December $60 $54 90% $102 170% Annual sales (in millions) = $400 $530 Discount = 1% 2% % customers who take discount = 50% 60% % customers who pay on day
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FM12 Ch 27 Toolkit - A 1 2 3 4 5 6 7 8 9 B C D E F G H...

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