Hw16 fin. mgmt.

Chapter 16: Homework
1. Swim Suits Unlimited is in a highly seasonal business, and the following summary balance
sheet data show its assets and liabilities at peak and off-peak seasons (in thousands of dollars):
Peak Off-Peak
Cash $ 50 $ 30
Marketable securities 0 20
Accounts receivable 40 20
Inventories 100 50
Net fixed assets 500 500
Total assets $690 $620
Payables and accruals $ 30 $ 10
Short-term bank debt 50 0
Long-term debt 300 300
Common equity 310 310
Total claims $690 $620
From this data we may conclude that
a. Swim Suits' current asset financing policy calls for exactly matching asset and liability
maturities.
b. Swim Suits' current asset financing policy is relatively aggressive; that is, the company
finances some of its permanent assets with short-term discretionary debt.
c. Swim Suits follows a relatively conservative approach to current asset financing; that is,
some of its short-term needs are met by permanent capital.
d. Without income statement data, we cannot determine the aggressiveness or conservatism of
the company's current asset financing policy.
e. Without cash flow data, we cannot determine the aggressiveness or conservatism of the
company's current asset financing policy.
Answer: C is correct.
2. Which of the following statements is CORRECT?
a. A firm that makes 90% of its sales on credit and 10% for cash is growing at a constant rate of
10% annually. Such a firm will be able to keep its accounts receivable at the current level, since
the 10% cash sales can be used to finance the 10% growth rate.
b. In managing a firm's accounts receivable, it is possible to increase credit sales per day
yet still keep accounts receivable fairly steady, provided the firm can shorten the length of
its collection period (its DSO) sufficiently.
c. Because of the costs of granting credit, it is not possible for credit sales to be more profitable
than cash sales.
d. Since receivables and payables both result from sales transactions, a firm
e. Other things held constant, if a firm can shorten its DSO, this will lead to a higher current
ratio.
Answer: B is correct.
3. Halka Company is a no-growth firm. Its sales fluctuate seasonally, causing total assets to vary
from $320,000 to $410,000, but fixed assets remain constant at $260,000. If the firm follows a
maturity matching (or moderate) working capital financing policy, what is the most likely total
of long-term debt plus equity capital?
a. $260,642
b. $274,360
c. $288,800
d. $304,000
e. $320,000
Answer: E is correct.
4. Your consulting firm was recently hired to improve the performance of Shin-SoenenInc,
which is highly profitable but has been experiencing cash shortages due to its high growth rate.
As one part of your analysis, you want to determine the firm’s cash conversion cycle. Using the
following information and a 365-day year, what is the firm’s present cash conversion cycle?
Average inventory = $75,000
Annual sales = $600,000
Annual cost of goods sold = $360,000
Average accounts receivable = $160,000
Average accounts payable = $25,0
a. 120.6 days
b. 126.9 days
c. 133.6 days
d. 140.6 days
e. 148.0 days
Answer: E is correct.
5. Affleck Inc.'s business is booming, and it needs to raise more capital. The company purchases
supplies on terms of 1/10 net 20, and it currently takes the discount. One way of getting the
needed funds would be to forgo the discount, and the firm's owner believes she could delay
payment to 40 days without adverse effects. What would be the effective annual percentage cost
of funds raised by this action? (Assume a 365-day year.)
a. 10.59%
b. 11.15%
c. 11.74%
d. 12.36%
e. 13.01%
Answer: E is correct.

Recomendados

Financial Plan ExampleFinancial Plan Example
Financial Plan ExampleDaniel Cohen
38.2K visualizações1 slide
Hw02 fin. mgmt.Hw02 fin. mgmt.
Hw02 fin. mgmt.PureHoneyBee
339 visualizações3 slides
Week 6 ratiosWeek 6 ratios
Week 6 ratiosboatsnhoes16
217 visualizações14 slides
Fin 370 final exams 1Fin 370 final exams 1
Fin 370 final exams 1examzking
492 visualizações10 slides

Mais conteúdo relacionado

Mais procurados

IYO Interval Yacht OwnershipIYO Interval Yacht Ownership
IYO Interval Yacht OwnershipBernard Coffey
246 visualizações24 slides
Fin 370 final examFin 370 final exam
Fin 370 final examnvbnvh87
472 visualizações5 slides
Fin 370 final examFin 370 final exam
Fin 370 final exambubyslyke
233 visualizações8 slides

Mais procurados(8)

IYO Interval Yacht OwnershipIYO Interval Yacht Ownership
IYO Interval Yacht Ownership
Bernard Coffey246 visualizações
Fin 370 final exam mcq`s correct answers 100%Fin 370 final exam mcq`s correct answers 100%
Fin 370 final exam mcq`s correct answers 100%
Austing_3458 visualizações
Fin 370 final examFin 370 final exam
Fin 370 final exam
nvbnvh87472 visualizações
CMW - June 2014 Annual Financial ReportCMW - June 2014 Annual Financial Report
CMW - June 2014 Annual Financial Report
Brad Sheahon499 visualizações
Fin 370 final examFin 370 final exam
Fin 370 final exam
bubyslyke233 visualizações
Acct 504 final examAcct 504 final exam
Acct 504 final exam
shdhfjhsshshdh7.1K visualizações

Similar a Hw16 fin. mgmt.(20)

Bookkeeping Basic & Quickbooks for ContractorsBookkeeping Basic & Quickbooks for Contractors
Bookkeeping Basic & Quickbooks for Contractors
Terry Chong429 visualizações
Answers to-final-examsAnswers to-final-exams
Answers to-final-exams
AnasAlwadi96 visualizações
Accounting ReviewAccounting Review
Accounting Review
Jen Santiago2 visualizações
Butler Lumber Company EssayButler Lumber Company Essay
Butler Lumber Company Essay
Claudia Brown2 visualizações
Star River Case SummaryStar River Case Summary
Star River Case Summary
Jessica Tanner3 visualizações
FIN 512 WEEK 2 Answer Key EssayFIN 512 WEEK 2 Answer Key Essay
FIN 512 WEEK 2 Answer Key Essay
Tracy Jimenez2 visualizações
Intermediate Accounting Comprehensive ProjectIntermediate Accounting Comprehensive Project
Intermediate Accounting Comprehensive Project
Shivani Desai4.1K visualizações
Finc600 full course finc 600Finc600 full course finc 600
Finc600 full course finc 600
arnitaetsitty127 visualizações
Description  Instructions Complete final exam.Ques.docxDescription  Instructions Complete final exam.Ques.docx
Description Instructions Complete final exam.Ques.docx
theodorelove437639 visualizações
Balance sheet testBalance sheet test
Balance sheet test
Dulwich College Shanghai509 visualizações
Managing current-assetsManaging current-assets
Managing current-assets
meharme2K visualizações
Working capital - The growth trapWorking capital - The growth trap
Working capital - The growth trap
Rob Haynes373 visualizações
Analyzing Liquidity Using the Cash Conversion CycleAnalyzing Liquidity Using the Cash Conversion Cycle
Analyzing Liquidity Using the Cash Conversion Cycle
Credit Management Association692 visualizações
Chapter 5 Assinment EssayChapter 5 Assinment Essay
Chapter 5 Assinment Essay
Barb Tillich2 visualizações
Working-Capital-Supplementary.pptxWorking-Capital-Supplementary.pptx
Working-Capital-Supplementary.pptx
ssuser4dbb4f11 visão
ACC 400 Final Exam GuideACC 400 Final Exam Guide
ACC 400 Final Exam Guide
firstcome0249 visualizações

Mais de PureHoneyBee

Hw17 fin. mgmt.Hw17 fin. mgmt.
Hw17 fin. mgmt.PureHoneyBee
6.1K visualizações2 slides
Hw15 fin. mgmt.Hw15 fin. mgmt.
Hw15 fin. mgmt.PureHoneyBee
7.4K visualizações3 slides
Hw14 fin. mgmt.Hw14 fin. mgmt.
Hw14 fin. mgmt.PureHoneyBee
8K visualizações3 slides
Hw13 fin. mgmt.Hw13 fin. mgmt.
Hw13 fin. mgmt.PureHoneyBee
2.2K visualizações2 slides
Hw12 fin. mgmt.Hw12 fin. mgmt.
Hw12 fin. mgmt.PureHoneyBee
7.3K visualizações3 slides
Hw11 fin. mgmt.Hw11 fin. mgmt.
Hw11 fin. mgmt.PureHoneyBee
4.2K visualizações3 slides

Mais de PureHoneyBee(15)

Hw17 fin. mgmt.Hw17 fin. mgmt.
Hw17 fin. mgmt.
PureHoneyBee6.1K visualizações
Hw15 fin. mgmt.Hw15 fin. mgmt.
Hw15 fin. mgmt.
PureHoneyBee7.4K visualizações
Hw14 fin. mgmt.Hw14 fin. mgmt.
Hw14 fin. mgmt.
PureHoneyBee8K visualizações
Hw13 fin. mgmt.Hw13 fin. mgmt.
Hw13 fin. mgmt.
PureHoneyBee2.2K visualizações
Hw12 fin. mgmt.Hw12 fin. mgmt.
Hw12 fin. mgmt.
PureHoneyBee7.3K visualizações
Hw11 fin. mgmt.Hw11 fin. mgmt.
Hw11 fin. mgmt.
PureHoneyBee4.2K visualizações
Hw10 fin. mgmt.Hw10 fin. mgmt.
Hw10 fin. mgmt.
PureHoneyBee401 visualizações
Hw09 fin. mgmt.Hw09 fin. mgmt.
Hw09 fin. mgmt.
PureHoneyBee1.8K visualizações
Hw08 fin. mgmt.Hw08 fin. mgmt.
Hw08 fin. mgmt.
PureHoneyBee7.3K visualizações
Hw07 fin. mgmt.Hw07 fin. mgmt.
Hw07 fin. mgmt.
PureHoneyBee4K visualizações
Hw06 fin. mgmt.Hw06 fin. mgmt.
Hw06 fin. mgmt.
PureHoneyBee2.9K visualizações
Hw05 fin. mgmt.Hw05 fin. mgmt.
Hw05 fin. mgmt.
PureHoneyBee4.2K visualizações
Hw04 fin. mgmt.Hw04 fin. mgmt.
Hw04 fin. mgmt.
PureHoneyBee5.4K visualizações
Hw03 fin. mgmt.Hw03 fin. mgmt.
Hw03 fin. mgmt.
PureHoneyBee5.2K visualizações
Hw01 fin. mgmt.Hw01 fin. mgmt.
Hw01 fin. mgmt.
PureHoneyBee1.6K visualizações

Último(20)

Stock Market Brief Deck 1121.pdfStock Market Brief Deck 1121.pdf
Stock Market Brief Deck 1121.pdf
Michael Silva68 visualizações
Teaching Third Generation Islamic EconomicsTeaching Third Generation Islamic Economics
Teaching Third Generation Islamic Economics
Asad Zaman13 visualizações
Monthly Market Outlook | November 2023Monthly Market Outlook | November 2023
Monthly Market Outlook | November 2023
iciciprumf22 visualizações
DDKT-Praga.pdfDDKT-Praga.pdf
DDKT-Praga.pdf
GRAPE10 visualizações
Lundin Gold Corporate Presentation Nov 2023.pdfLundin Gold Corporate Presentation Nov 2023.pdf
Lundin Gold Corporate Presentation Nov 2023.pdf
Adnet Communications192 visualizações
 supplyfied .pdf supplyfied .pdf
supplyfied .pdf
ValueBusiness20 visualizações
DDKT-SummerWorkshop.pdfDDKT-SummerWorkshop.pdf
DDKT-SummerWorkshop.pdf
GRAPE14 visualizações
DDKT-SAET.pdfDDKT-SAET.pdf
DDKT-SAET.pdf
GRAPE27 visualizações
MATRIX.pptxMATRIX.pptx
MATRIX.pptx
baijup414 visualizações
Ingenious Nov 2023 to Jan 2024.pdfIngenious Nov 2023 to Jan 2024.pdf
Ingenious Nov 2023 to Jan 2024.pdf
Ankur Shah24 visualizações
Presentation.pdfPresentation.pdf
Presentation.pdf
GRAPE12 visualizações
Summary of financial results for the 3Q2023Summary of financial results for the 3Q2023
Summary of financial results for the 3Q2023
InterCars74 visualizações
ROLEOFRESERVEBANKININDIANBANKINGSYSTEM.pdfROLEOFRESERVEBANKININDIANBANKINGSYSTEM.pdf
ROLEOFRESERVEBANKININDIANBANKINGSYSTEM.pdf
Mdshamir58 visualizações
Stock Market Brief Deck 1124.pdfStock Market Brief Deck 1124.pdf
Stock Market Brief Deck 1124.pdf
Michael Silva57 visualizações
Jeremy Hunt's letter to Nausicaa DelfasJeremy Hunt's letter to Nausicaa Delfas
Jeremy Hunt's letter to Nausicaa Delfas
Henry Tapper509 visualizações
score 10000.pdfscore 10000.pdf
score 10000.pdf
sadimd0076 visualizações
GroupPresentation_MicroEconomicsGroupPresentation_MicroEconomics
GroupPresentation_MicroEconomics
BethanyAline20 visualizações
supplyfied .pdfsupplyfied .pdf
supplyfied .pdf
ValueBusiness14 visualizações

Hw16 fin. mgmt.

  • 1. Chapter 16: Homework 1. Swim Suits Unlimited is in a highly seasonal business, and the following summary balance sheet data show its assets and liabilities at peak and off-peak seasons (in thousands of dollars): Peak Off-Peak Cash $ 50 $ 30 Marketable securities 0 20 Accounts receivable 40 20 Inventories 100 50 Net fixed assets 500 500 Total assets $690 $620 Payables and accruals $ 30 $ 10 Short-term bank debt 50 0 Long-term debt 300 300 Common equity 310 310 Total claims $690 $620 From this data we may conclude that a. Swim Suits' current asset financing policy calls for exactly matching asset and liability maturities. b. Swim Suits' current asset financing policy is relatively aggressive; that is, the company finances some of its permanent assets with short-term discretionary debt. c. Swim Suits follows a relatively conservative approach to current asset financing; that is, some of its short-term needs are met by permanent capital. d. Without income statement data, we cannot determine the aggressiveness or conservatism of the company's current asset financing policy. e. Without cash flow data, we cannot determine the aggressiveness or conservatism of the company's current asset financing policy. Answer: C is correct.
  • 2. 2. Which of the following statements is CORRECT? a. A firm that makes 90% of its sales on credit and 10% for cash is growing at a constant rate of 10% annually. Such a firm will be able to keep its accounts receivable at the current level, since the 10% cash sales can be used to finance the 10% growth rate. b. In managing a firm's accounts receivable, it is possible to increase credit sales per day yet still keep accounts receivable fairly steady, provided the firm can shorten the length of its collection period (its DSO) sufficiently. c. Because of the costs of granting credit, it is not possible for credit sales to be more profitable than cash sales. d. Since receivables and payables both result from sales transactions, a firm e. Other things held constant, if a firm can shorten its DSO, this will lead to a higher current ratio. Answer: B is correct. 3. Halka Company is a no-growth firm. Its sales fluctuate seasonally, causing total assets to vary from $320,000 to $410,000, but fixed assets remain constant at $260,000. If the firm follows a maturity matching (or moderate) working capital financing policy, what is the most likely total of long-term debt plus equity capital? a. $260,642 b. $274,360 c. $288,800 d. $304,000 e. $320,000 Answer: E is correct.
  • 3. 4. Your consulting firm was recently hired to improve the performance of Shin-SoenenInc, which is highly profitable but has been experiencing cash shortages due to its high growth rate. As one part of your analysis, you want to determine the firm’s cash conversion cycle. Using the following information and a 365-day year, what is the firm’s present cash conversion cycle? Average inventory = $75,000 Annual sales = $600,000 Annual cost of goods sold = $360,000 Average accounts receivable = $160,000 Average accounts payable = $25,0 a. 120.6 days b. 126.9 days c. 133.6 days d. 140.6 days e. 148.0 days Answer: E is correct. 5. Affleck Inc.'s business is booming, and it needs to raise more capital. The company purchases supplies on terms of 1/10 net 20, and it currently takes the discount. One way of getting the needed funds would be to forgo the discount, and the firm's owner believes she could delay payment to 40 days without adverse effects. What would be the effective annual percentage cost of funds raised by this action? (Assume a 365-day year.) a. 10.59% b. 11.15% c. 11.74% d. 12.36% e. 13.01% Answer: E is correct.