Current Asset Management 10

Current Asset Management 10 - Net Income $42,000.00 Now...

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

View Full Document Right Arrow Icon
Old Exam Questions - Current Asset Management Page 10 of 12 Pages Net Income $42,000.00 Now make the following assumptions: Assume a 365-day year Current sales are $2,000 per day (all on credit) Variable costs are equal to 80 percent of sales Fixed costs are equal to $46,000 Current days sales outstanding are 30 days, giving an average accounts receivable balance of $60,000 Current bad debt expense is equal to 2 percent of sales Current interest expense is equal to $15,400 The firm's tax rate is 40 percent. The firm is planning to loosen up its credit standard and its credit period. They expect this change in standards will result in sales increasing by 20 percent to $2,400 per day. The average days sales outstanding (for both new and old sales) will increase to 50 days. Bad debt will remain at 2 percent for the current sales, but will rise to 4 percent on the new, incremental sales. The firm can raise additional funds for investment in receivables at a nominal
Background image of page 1
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 07/13/2011 for the course FIN 4414 taught by Professor Staff during the Spring '08 term at University of Florida.

Ask a homework question - tutors are online