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Finance questions

7. It costs Smith Widget Company $20 to place an order to its supplier. It also costs the company $2 per widget to store the unsold inventory in its warehouse. If the company sells 30,000 widgets each year, what quantity should the company purchase when it places an order to its supplier? ________________

8. A forecast of sales by Fred Smith Hardware Company for the first 4 months of 2005 are (in thousand dollars):

Month 1 2 3 4

Cash sales 180 210 180 220
Credit sales 240 280 300 340

Expected cash collections: ______ ______ ______ ______

On average, 40 percent of credit sales are paid in the current month, 50 percent in the next month, and the remainder in the month after that. What are expected cash collections for each month?

9. If the balance sheet of a firm indicates that total assets exceed current liabilities plus shareholder's equity, then the firm has: (circle one)
a. no retained earnings
b. long-term debt
c. no accumulated depreciation
d. no long-term debt

10. Quickstart Battery Company produces car batteries. The company has an inventory conversion period of 75 days, a receivables collection period of 38 days, and a payables deferral period of 30 days. Assuming 360 days per year, what is the length of the company's cash conversion cycle? _____________ days

11. The December 31, 1999, balance sheet of Serena's Tennis Shop, Inc. showed current assets of $900 and current liabilities of $325. The December 31, 2000, balance sheet showed current assets of $925 and current liabilities of $475. What was the company's change in net working capital? (circle one)
a. plus $125
b. minus $125
c. plus $450
d. minus $450

12. Kaleb's Karate Supply had a profit margin of 7 percent, sales of $10 million, and total assets of $6 million. What was total asset turnover? If management set a goal of increasing total asset turnover to 2.25 times, what would the new sales figure need to be, assuming no increase in total assets?

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7. It costs Smith Widget Company $20 to place an order to its supplier. It also costs the company $2 per widget to store the unsold inventory in its warehouse. If the company sells 30,000 widgets each year, what quantity should the company purchase when it places an order to its supplier? ________________

Answer: 775

EOQ = square root of (2 x Annual demand x Order Cost / Storage cost)
Or EOQ = square root of (2 x 30,000 x $ 2 / 2)

8. A forecast of sales by Fred Smith Hardware Company for the first 4 months of 2005 are (in thousand dollars):

Month 1 2 3 4

Cash sales 180 210 180 220
Credit sales 240 280 300 340

Expected cash collections:

On average, 40 percent of credit sales are paid in the current month, 50 percent in the next month, and ...

Solution Summary

Answers questions on EOQ, cash collections, cash conversion cycle etc.

$2.19