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Renfro Industries - Networking capital, cash balance, Finance

Please see the attached document for the problems.

(1). Renfro Industries balance sheet for December 31, 2010 is as follows:
Assets ($000) Liabilities and Equity ($000)
Cash $8,000 Accounts Payable $36,000
Marketable Securities 4,000 Notes Payable 12,000
Accounts Receivable 60,000 Other Current Liabilities 32,000
Inventories 100,000 Long-term debt 80,000
Plant & Equip. 220,000 Preferred Stock 48,000
Less: Deprec. 64,000 Common Stock 20,000
Net Plant & Equip. 156,000 Paid-in Surplus 40,000
Retained Earnings 60,000
Total Assets $328,000 Total Claims $328,000
Required: What is Renfro's net working capital at the end of 2010?
(2). Great Skot expects to have cash receipts in June of $532,160. Skot's cash disbursements in June are $581,720, including an interest payment on a bond issue of $32,000. If Skot wishes to maintain a cash balance of $40,000, how much will Skot have to borrow if it started the month with a cash balance of $52,000?
(3). Bluegrass Distilleries, Inc., refuses to extend credit to any wholesale distributors who have a history of being delinquent in repaying credit extended to them. This policy results in lost sales of $10 million annually. Based on past experience with these types of customers, the firm estimates that the average collection period would be 90 days, and that the bad-debt loss ratio would be 6 percent. The firm's variable cost ratio is 0.80, making its profit contribution ratio 0.20. Bluegrass Distilleries required pretax return (i.e., opportunity cost) on receivables investments is 20 percent. When converting from annual to daily data or vice versa, assume there are 365 days per year. If Bluegrass extends full credit to these (previously delinquent) customers, determine the total increase in credit-related costs.

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Solution Summary

Networking capital, cash balances and finance for Renfro Industries are examined.

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