1. The manager of your receivables’ department states that the firm’s accounts receivable turn over 25 times per year. What does this mean?
a. It takes about 1 day, on average, for customers to pay for their orders
b. It takes about 340 days, on average, for customers to pay for their orders
c. None of the answers are correct
d. It takes about 15 days, on average, for customers to pay for their orders
2. You are given the following returns on "the market" and Stock F during the last three years. We could calculate beta using data for Years 1 and 2 and then, after Year 3, calculate a new beta for Years 2 and 3. How different are those two betas, i.e., what's the value of beta 2 - beta 1? (Hint: You can find betas using the Rise-Over-Run method, or using your calculator's regression function.)
Year Market Stock F
1 6.10% 6.50%
2 12.90% -3.70%
3 16.20% 21.71%
Note: Please show all work and calculations.