Problem 1: Company A purchases goods from its supplier on terms of 2/10, net 40. The effective annual cost to Company A if it chooses not to take advantage of the trade discount offered and stretches the accounts payable to 60 days is closest to: What is the EAR, effective annual rate?
Problem 2: Company A had sales of $980 million and a cost of goods sold of $560 million in 2006. A simplified balance sheet for the Company A appears below:
|
Assets
|
|
Liabilities and Equity)
|
|
Cash
|
21
|
Accounts payablei 6C
|
|
Accounts receivable
|
81
|
Notes payable
|
425
|
|
Inventory
|
9C
|
|
Accruals
|
45
|
|
Total current assets
|
20C
|
|
Total current liabilities
|
53C
|
|
Net plant, property, and equipment
|
6,10C
|
|
Long term deb 2,725
|
|
Total assets
|
6,300
|
|
Total liabilitieg 3,255
|
|
|
|
|
Common equity! 3,045
|
|
|
|
|
Total liabilities anc
|
6,300
|
Company A Balance Sheet As of December 31, 2006 (millions of dollars)
Company A cash conversion cycle is closest to: (Number of days)
Problem 3:
Company A had sales of $980 million and a cost of goods sold of $560 million in 2006. A simplified balance sheet for the firm appears below:
Company A Balance Sheet As of December 31, 2006 (millions of dollars)
|
Assets
|
|
|
Liabilities and Equit
|
|
|
Cash
|
25
|
|
Accounts payable'
|
6C
|
|
Accounts receivable
|
85
|
|
Notes payable'
|
425
|
|
Inventory
|
9C
|
|
AccruaU
|
45
|
|
Total current assets
|
20C
|
|
Total current liabilitie4
|
53C
|
|
Net plant, property, and equipment
|
6,10C
|
|
Long term deb
|
2,725
|
|
Total assets
|
6,30C
|
|
Total liabilitiei
|
3,255
|
|
|
|
|
Common equit)
|
3,045
|
|
|
|
|
Total liabilities anc
|
6,300
|
|
equit)
|
Company A Accounts Payable days is closest to: (Number of days)