Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

a) Snow Ltd purchases supplies on terms of 2/10, net 40. If Snow Ltd chooses to take the discount offered, it must obtain a bank

a) Snow Ltd purchases supplies on terms of 2/10, net 40. If Snow Ltd chooses to take the discount offered, it must obtain a bank loan to afford it. ANT bank has quoted an APR of 14% on borrowed funds. (4 marks)

i) Once Snow Ltd passes the discount period, how much cost will it incur in an annual term?

ii) Calculate the EAR for ANT bank.

iii) What should Snow Ltd do? do?

b) Bercraft Ltd has an average accounts payable balance of $280,000. Its average annual cost of goods sold is $4,780,000. It receives terms of 1/20, net 40 from its suppliers. Is Bercraft managing its accounts payables well? Why or why not? (3 marks)

c) Westerly industries has the following financial information. Calculate its cash conversion cycle and interpret what the value means. (3 marks)

Sales

$110,000

Cost of goods sold

$90,000

Accounts receivable

$32,000

Inventory

$20,000

Accounts payable

$50,000

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Fundamentals Of Financial Management

Authors: James Van Horne, John Wachowicz

13th Revised Edition

978-0273713630, 273713639

More Books

Students also viewed these Finance questions