(16-1) Williams & Sons last year reported sales of $10 million and an inventory turnover ratio of

2. The company is now adopting a new inventory system. If the new system is able to

reduce the firms inventory level and increase the firms inventory turnover ratio to 5

while maintaining the same level of sales, how much cash will be freed up?

(16-2) Medwig Corporation has a DSO of 17 days. The company averages $3,500 in credit sales

each day. What is the companys average accounts receivable?671

(16-4) A large retailer obtains merchandise under the credit terms of 1/15, net 45, but routinely

takes 60 days to pay its bills. (Because the retailer is an important customer, suppliers

allow the firm to stretch its credit terms.) What is the retailers effective cost of trade

credit?

(16-5) A chain of appliance stores, APP Corporation, purchases inventory with a net price of

$500,000 each day. The company purchases the inventory under the credit terms of 2/15,

net 40. APP always takes the discount but takes the full 15 days to pay its bills. What is the

average accounts payable for APP?