1a

Negus Enterprises has an inventory conversion period of 58 days, an average collection period of 43 days, and a payables deferral period of 37 days. Assume that cost of goods sold is 80% of sales. Assume 365 days in year for your calculations.

What is the length of the firm's cash conversion cycle? days

If Negus's annual sales are $3,721,675 and all sales are on credit, what is the firm's investment in accounts receivable? Round your answer to the nearest dollar. $

How many times per year does Negus Enterprises turn over its inventory? Round your answer to two decimal places.

1b

Effective Cost of Trade Credit

The D.J. Masson Corporation needs to raise $600,000 for 1 year to supply working capital to a new store. Masson buys from its suppliers on terms of 2/10, net 90, and it currently pays on the 10th day and takes discounts. However, it could forgo discounts, pay on the 90th day, and get the needed $600,000 in the form of costly trade credit. What is the effective annual interest rate of this trade credit? Assume 365 days in year for your calculations. Do not round intermediate calculations. Round your answer to two decimal places.

%

1c

Cost of Trade Credit

Grunewald Industries sells on terms of 3/10, net 40. Gross sales last year were $4,289,500, and accounts receivable averaged $482,000. Half of Grunewald's customers paid on the 10th day and took discounts. What are the nominal and effective costs of trade credit to Grunewald's nondiscount customers? (Hint: Calculate sales/day based on a 365-day year; then get average receivables of discount customers; then find the DSO for the nondiscount customers.) Do not round intermediate calculations. Round your answers to two decimal places.

Nominal cost	%
Effective cost	%