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Question
Mace Auto Parts Company sells to retail auto supply stores on credit terms of "net 60". Annual credit sales are $300 million (spread evenly throughout the year) and its accounts average 28 days overdue. The firm's variable cost ratio is 0.75 (i.e. variable costs are 75 percent of sales). When converting from annual to daily data or vice versa, assume there are 365 days per year. Suppose that Mace's sales are expected to increase by 20 percent next year and, through more effective collection methods, the firm is able to reduce its average collection period by20 days. Determine the firm's average investment in receivables for next year under these conditions.a. $67,068,493
b. $56,666,667
c. $5,294,118
d. $73,972,602
Answer
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Related questions
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b. 26.25%
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Q:
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Q:
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Q:
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Q:
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d. common stock at par
Q:
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b. have assets in excess of $500,000
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Q:
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b. that dividends may only be paid out of retained earnings
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Q:
Explain the pecking order theory.
Q:
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Q:
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Q:
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Q:
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Q:
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b. financial distress costs
c. agency costs
d. All of these are correct.
Q:
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b. contains all equity
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Q:
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a. initially rises slowly, then falls beyond some point
b. increases at a steady rate throughout the entire range
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d. initially rises slowly, then increases rapidly beyond some point
Q:
Perfect capital markets imply the following:
a. there are no transactions costs for buying and selling securities
b. relevant information is readily available for individuals and is costless to obtain
c. all investors can borrow and lend at the same rate
d. All of these answers are correct.
Q:
Two prominent finance researchers (Modigliani and Miller) showed that
a. the firm's optimal capital structure consists of approximately equal proportions of debt and equity
b. the value of the firm is independent of its capital structure in perfect capital markets with no income taxes
c. the firm's cost of capital is minimized when its capital structure consists of approximately equal proportions of debt and equity
d. the value of the firm is independent of its capital structure in perfect capital markets with income taxes
Q:
Chirping Charlie Canary Farms has fixed operating costs of $10,000. It is trying to determine its breakeven point in dollars for its special bird seed. The sale price for each bag of bird seed is $25 and its variable cost per bag is $15. The firm's operating breakeven point in dollars is:
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b. $16,667
c. $6,250
d. $25,000
Q:
Borkstran has sales of $7.8 million, a variable cost ratio of 0.6, EBIT of $1.1 million, and a degree of combined leverage of 3.4. What is Borkstran's degree of financial leverage?
a. 1.20
b. 0.73
c. 2.29
d. 0.84
Q:
Kenzel has an EPS of $4.20 and sales are $9 million. If the firm has a degree of operating leverage of 4.0 and a degree of financial leverage of 5.2, forecast EPS if the firm expects a 4% sales decline.
a. $0.71
b. $3.49
c. $4.03
d. $3.33