Inventory Management

Williams & Sons last year reported sales of $144 million, cost of goods sold (COGS) of $120 and an inventory turnover ratio of 5. The company is now adopting a new inventory system. If the new system is able to reduce the firm's inventory level and increase the firm's inventory turnover ratio to 8 while maintaining the same level of sales and COGS, how much cash will be freed up? Do not round intermediate calculations. Round your answer to the nearest dollar.

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Problem 16-02

Receivables Investment

Medwig Corporation has a DSO of 42 days. The company averages $8,000 in sales each day (all customers take credit). What is the company's average accounts receivable? Round your answer to the nearest dollar.

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Problem 16-04

Cost of Trade Credit

A large retailer obtains merchandise under the credit terms of 2/15, net 35, but routinely takes 65 days to pay its bills. (Because the retailer is an important customer, suppliers allow the firm to stretch its credit terms.) What is the retailer's effective cost of trade credit? Assume 365 days in year for your calculations. Do not round intermediate calculations. Round your answer to two decimal places.

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