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boyakko [2]
3 years ago
10

Garcia Industries has sales of $167,500 and accounts receivable of $18,500, and it gives its customers 25 days to pay. The indus

try average DSO is 27 days, based on a 365-day year. If the company changes its credit and collection policy sufficiently to cause its DSO to fall to the industry average, and if it earns 8.0% on any cash freed-up by this change, how would that affect its net income, assuming other things are held constant? Assume all sales to be on credit.
Business
1 answer:
Vikki [24]3 years ago
7 0

Answer:

the company can earn an additional $488.80 on interest

Explanation:

total sales on credit = $167,500

interest rate = 8%

accounts receivable = $18,500

sales per day = $167,500 / 365 days = $458.90 per day

days sales outstanding (DSO) = ($18,500 / $167,500) x 365 days = 40

average industry DSO = 27 days

to determine the value of accounts receivable to match the industry's DSO:  (AR / $167,500) x 365 = 27

AR = 27 x ($167,500 / 365) = $12,390

So accounts receivable must lower by ⇒ $18,500 - $12,390 = $6,110

that $6,110 should earn 8% interest = $6,110 x 0.08 = $488.80

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Dée Trader opens a brokerage account and purchases 300 shares of Internet Dreams at $36 per share. She borrows $4,500 from her b
meriva

Answer:

A) Dee´s Margin = 58.33%; B) Remaining Margin if price drops to $26 is 30.56% C) She won´t receive a margin call (but close...)

D) Rate of Return = - 32.36%

Explanation:

Hi, first let´s find out what the initial margin is, for that we have to use the following formula.

Margin=\frac{Equity}{ValueStocks}

Now, in order to find the equity, we have to find the total value of the stocks and substract the debt from it, since it was 300 shares at $30 per share, the total value of the investment is $7,800, therefore, its equity is $3,300 ($7,800-$4,500).

So everything should look like this

Margin=\frac{6,300}{10,800} =0.5833

So the initial margin was 58.33%

If the price drops to $26 by the end of the year, the remaining margin in her account is:

Margin=\frac{3,300}{10,800} =0.3056

So the remaining margin one year later, after the stock price dropped to $26 was 30.56%

Now, in order to find the rate of return on her investment, at the end of the year, we have to remember that the money loaned was at 11%, therefore, the best way to find out the return of this investment is to convert this into money, like such.

First (Gross Return of the stock)

Gross Return=\frac{Final.P-Initial.P}{Initial.P} x100

Gross Return=\frac{26-36}{36} x100=-0.2778

Ok, we have the gross return, which is -$27.78%

The interest expenses are just as follows.

Interest Expense=4,500*0.11=-495

To find the return on the investmen, we need to use the following formula.

RateReturn=\frac{FinalInvestment-InitialInvestment}{InitialInvesment} x100

The final investment is: Gross return($)+interest Expenses

FinalInvest=\frac{300*(-10)+(-4,500*0.11)}{10,800} =-0.3236

This means that, by the end of the year, her return on the investment was -32.36%. In money, this is - $3,495.

Best of luck.

5 0
3 years ago
Each of the following items must be considered in preparing a statement of cash flows. Indicate where each item is to be reporte
Mashcka [7]

Answer:

(a) Operating activity

(b) Financing activity

(c) Operating activity

(d) Investing activity

Explanation:

Basically there are three types of activities:

1. Operating activities: It includes those transactions which affect the working capital, and it records transactions of cash receipts and cash payments.

2. Investing activities: It records those activities which include purchase and sale of the fixed assets

3. Financing activities: It records those activities which affect the long term liability and shareholder equity balance.  

So,

(a) Increase in accounts receivable come under the operating activities, and this is to be in a negative amount

(b) Issue of preference shares comes under financing activity, and this is added while computing the financing activities

(c) The depreciation expenses are added in the net income whereas the bond premium amortization is to be deducted from the net income. These both items have come under operating activities

(d) An increase in land value comes under the investing activity.

4 0
3 years ago
Before an interview, you should perform a self-assessment to:
ELEN [110]

Answer: review your strengths, weaknesses, and career goals

6 0
2 years ago
The XYZ Fund had NAV per share of $17.50 on January 1, 2016. On December 31 of the same year, the fund's NAV was $19.47. Income
STatiana [176]

Answer:

21.26%

Explanation:

Calculation for the Rate of return that the

investor receive on the XYZ Fund last year

Using this formula

Rate of return =Current value - original value +Income distributions+ Capital gain distributions) / original value) x 100

Where,

Current value =$19.47

Original value =$17.50

Income distributions=$0.75

Capital gain distributions=$1.00

Let plug in the formula

Rate of return($19.47 - $17.50 + $0.75 + $1.00)/$17.50

Rate of return =($1.97+0.75+$1.00)/$17.50

Rate of return=$3.72/$17.50

Rate of return =0.2126*100

Rate of return =21.26%

Therefore the rate of return that did investor receive on the XYZ Fund last year will be 21.26%

8 0
3 years ago
Firms colluding: a. Earn short run normal profits. B. Increase competition by firms through advances in technology. C. Earn shor
IgorLugansk [536]

Answer:

D. Earn short run economic profits

Explanation:

A cartel can be defined as a formal agreement reached (collusion) in an oligopolistic industry between two or more business firms that are saddled with the responsibility of producing goods and services in order to make price and output decisions such as price regulation, total level of output or supply, allocation of customers, market shares, territory allocation, division of profits, collusive bidding etc.

This ultimately implies that, when a group of independent firms in an oligopolistic industry collude by reaching a formal agreement to regulate supply, as well as manipulate or regulate prices, they do so to increase their profits and market dominance.

Hence, firms colluding earn short run economic profits.

4 0
2 years ago
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