concept map for

foundations of financial management

Anarchy Corp. Is evaluating a possible change to their AR policy. Currently, they have $200,000 in sales on which they earn a profit margin of 10%. Their average collection period is currently 40 days, and they would like to improve it to 20 days. They are considering the use of UK Bank who has guaranteed they could achieve that improved collection period. UK Bank charges a fee of $15,000 annually. Anarchy estimates it could earn a return of 7% on any freed up cash. Anarchy estimates that sales would drop by 10% if they use UK Bank. Question 5 (6 marks) Okanagan Docks Ltd. is preparing a cash budget for the first quarter of the coming year. Experience has shown that 60% of sales is collected in the month of sale, 30% is collected in the month after sale, and 10% is collected two months after sale. 1. Calculate the total cash receipts for July, using the form below. (4 marks) May June $220,000 July $190,000 Sales $200,000