Current Asset Management Solutions 9

Current Asset Management Solutions 9 - -2,970.00 Gross...

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Old Exam Questions - Current Asset Management - Solutions Page 9 of 21 Pages A. $22.66 B. $18.66 * C. $24.66 D. $20.66 E. $16.66 New Sales = $3,960 - $3,600 = $360 New Sales Per Day = $360 / 360 = $1 per day Investment in Receivables : Old Sales = ($10)(30) = $300 New Sales = ($1)(60)(.75) = $45 Total Investment = $300 + $45 = $345 New Interest = ($345)(.10) = $34.50 New Bad Debt Expense = ($3,960 - $3,600)(.04) = $14.40 Change in Net Income = $221.66 - $196.80 = $24.66 Income Statement Year 0 Year 1 Sales 3,600.00 3,960.00 Variable Costs -2,700.00
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Unformatted text preview: -2,970.00 Gross Profit 900.00 990.00 Fixed Costs - 400.00- 400.00 Bad Debt Expense: Original - 72.00- 72.00 New ---- 14.40 EBIT 428.00 503.60 Interest: Original - 100.00- 100.00 New ---- 34.50 EBT 328.00 369.10 Taxes (40%) - 131.20-147.64 Net Income 196.80 221.46 11. Assume that for your company the average age of accounts receivable is 60 days, the average age of accounts payable is 45 days, and the average age of inventory is 72 days. Assuming a 365-day year, determine the length of the firms cash conversion cycle. * A. 87 days...
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