XYZ buys on credit terms of 2/10, net 30 days, and it always pay, on the 30th da

ID: 2767044 • Letter: X

Question

XYZ buys on credit terms of 2/10, net 30 days, and it always pay, on the 30th day. XYZ calculates that is annual trade credit $375,000. What is the firm's average accounts playable balance? Assume a 365-day year. $187,475 $374,951 $223,333 $562,426 $457,443 A firm has the following balance sheet Fixed assets are being used at 80 percent of capacity; sales for the year just ended were $200; sales will increase $10 per year for the next 4 years; the profit margin is 5 percent; and the dividend payout ratio is 60 percent. Assume that fixed assets cannot be sold. What are the total external financing requirements for the entire 4 years, i.e., the total AFN for the 4-year period? $4.00 $2.00 -$0.80 (Surplus) -$14.00 (Surplus) $0 Under the terms of trade found in most industries, the costly component of trade credit is relatively cheap, thus financially strong firms forego the cash discount. is relatively expensive, thus financially strong firms will take the cash discount. is relatively expensive, thus financially strong firms forgo the cash discount. is relatively cheap, thus financially strong firms will take the cash discount. Is relatively cheap, thus most financially strong firms don't consider the terms of trade. If XYZ Inc. had sales of $2027773 per year (all credit) and its days sales outstanding was equal to 35 day what was its average amount of accounts receivable outstanding?(Assume a 365-day year.) $194,444 $57,143 $5, 556 $97,222 $212,541

Explanation / Answer

Calculation of Average Amount of Accounts receivables outstanding:

Given:

Sales

$ 2,027,773

Average Collection period

35 Days

Number of days in a year =

365 Days

Average Amount of Accounts receivables outstanding = 2027773 * 35 / 365 =

$ 194,444

Formula :

(Average Amount of Accounts receivables outstanding = Sales * Average Collection period/ 365 Days)