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Unformatted text preview: 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 account....
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- Spring '11