1. The inventory turnover of Long Corporation is 16, and its closing inventory is $20,000. Assuming there are 360 days in a year, compute the company's inventory conversion period. (Give answer to one decimal place.)
2. If a firm wants to decrease its cash conversion cycle, which of the following actions should it take? Assume everything else is equal.
| | Loosen credit terms to increase the firm's sales. |
| | Delay payments made to suppliers so that the firm pays late. |
| | Purchase more raw materials to increase the average inventory the firm maintains. |
| | Increase the amount the firm borrows from its bank. |
| | Decrease the common equity on the firm's balance sheet. |
3.
McGrath Corporation recently issued 180-day commercial paper with a face value of $1,500,000 and a simple interest rate of 13 percent. The company paid a transaction fee equal to 0.3 percent of the amount issued, which was taken out of the issue amount before the company received any funds. Assuming there are 360 days in a year, what are the commercial paper's annual percentage rate (APR) and effective annual rate (rEAR), respectively?
| | APR = 7.30%; rEAR = 15.12% |
| | APR = 9.73%; rEAR = 9.84% |
| | APR = 13.97%; rEAR = 14.23% |
| | APR = 14.59%; rEAR = 15.12% |
| | APR = 15.34%; rEAR = 15.34% |
