Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Roomba Vacuum uses television advertising blitzes to generate consumer interest in its highly-touted roomba robot vaccuums. The TV advertising directs customers to the Roomba website

image text in transcribed
image text in transcribed
Roomba Vacuum uses television advertising blitzes to generate consumer interest in its highly-touted roomba robot vaccuums. The TV advertising directs customers to the Roomba website for more information. Once on the website, customers get a "no money.down, four equal monthly payments" coupon that customers can use against their purchase at checkout. Virtually all customers will use this coupon in making their final purchases. As a result, Roomba Vacuum carries a substantial balance in accounts receivable. It is imperative that the company manage credit risk, and careful attention is paid to the "accounts receivable turnover ratio" and the days outstanding." During 2020, net credit sales were $6,000,000. The sales were evenly spread throughout the year. The beginning-of-year net realizable value of accounts receivable was $2,150,000 and the end-of-year balance was $2,650,000. Calculate the accounts receivable turnover ratio" and the days outstanding." (Points: 8) Accounts Receivable Turnover Ratio: Days Outstanding 4 (b) In addition to the facts above, suppose Roomba plans to run major holiday sales campaign in December of 2020. This campaign allows no payments until 2021! This campaign is forecasted to generate an additional $3,000,000 in credit sales (and is forecasted to result in an end-of-year receivable balance of $5,650,000). What is the impact on the ratios (compared to the values you computed in part (a) if this campaign is approved? (Points:8) Accounts Receivable Turnover Ratio: 7 3 3 (b) In addition to the facts above, suppose Roomba plans to run major holiday sales campaign in December of 2020. This campaign allows no payments until 2021! This campaign is forecasted to generate an additional $3,000,000 in credit sales fand is forecasted to result in an end-of-year receivable balance of $5,650,000). What is the impact on the ratios (compared to the values you computed in part (a) if this campaign is approved? (Points:8) Accounts Receivable Turnover Ratio: 9 D 1 Days Outstanding le Having calculated (b) above. If you're the President of Roomba, and the VP of Sales presents this Holiday campaign for you to consider implementing would you approve it? Why or why not? (Points:5)

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

The Finance Book

Authors: Stuart Warner, Si Hussain

2nd Edition

1292401982, 978-1292401980

More Books

Students also viewed these Finance questions