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2010-10-11_151011_3_qs

# 2010-10-11_151011_3_qs - \$180,,whichisalsothe .,...

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Maddox Resources has credit sales of \$180,000 yearly with credit terms of net 30 days, which is also the  average collection period. Maddox does not offer a discount for early payment, so its customers take the  full 30 days to pay.  1. What is the average receivables balance?   Credit sales = \$180,000 Credit term= Net 30 days Hence, average daily sales = \$180,000/360 = \$500   (Considering 360 days year) Average receivable balance = \$500*30 = \$15,000 2. What is the receivables turnover?  Receivable turnover = Credit sales/Average receivable balance  =  \$180,000/\$15,000 = 12 ======================  Holland Construction Co. has an outstanding 180-day bank loan of \$400,000 at an annual interest rate of  9.5%. The company is required to maintain a 15% average compensating cash balance in its checking  account. What is the effective interest cost on the loan? Assume the company would not normally  maintain this average compensating balance amount.

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• Spring '11
• All
• cash conversion cycle, average receivable balance, average receivables balance, effective loan balance, average compensating balance

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2010-10-11_151011_3_qs - \$180,,whichisalsothe .,...

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