{[ promptMessage ]}

Bookmark it

{[ promptMessage ]}

Current Asset Management 1

Current Asset Management 1 - Your company is considering a...

Info icon This preview shows page 1. Sign up to view the full content.

View Full Document Right Arrow Icon
Old Exam Questions - Current Asset Management Page 1 of 12 Pages Current Asset Management 1. Your company has annual sales of $36,500,000 ($100,000 a day on a 365-day basis). On average, the company has $12,000,000 in inventory and $8,000,000 in accounts receivable. The company is looking for ways to shorten its cash conversion cycle (calculated on a 365-day basis). The CFO has proposed new policies that would result in a 20 percent reduction in both average inventories and accounts receivables. The company anticipates that these policies will also reduce sales by 10 percent. Accounts payable will remain unchanged. What effect would these policies have on the company's cash conversion cycle? 2. Your company currently fills mail orders from all over the U.S. and receipts come in to headquarters in Gainesville, Florida. The firm's average accounts receivable (A/R) is $2.5 million and is financed by a bank loan with 11 percent annual interest.
Image of page 1
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: Your company is considering a regional lockbox system to speed up collections which it believes will reduce A/R by 20 percent. The annual cost of the system is $15,000. What is the estimated net annual savings to the firm from implementing the lockbox system? A. $500,000 B. $ 30,000 C. $ 60,000 D. $ 55,000 E. $ 40,000 3. The accounts of your company indicate the following changes in long-term assets and capital for the past year: (1) Fifty thousand (50,000) shares of common stock were sold at $25 per share. (2) Two million dollars ($2 million) in bonds matured and were retired. (3) Dividends of $1 million were paid. (4) Net fixed assets declined by $200,000. (5) Net income was $2 million. (6) Depreciation expense was $1.5 million. What was the increase or decrease in net working capital? (Hint: Changes in net fixed assets incorporate changes in both gross fixed assets and accumulated depreciation.) A. $ 450,000 B. -$ 250,000 C. -$1,950,000 D. $1,950,000 E. $3,300,000...
View Full Document

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern