8. Suppose that ABC Inc. is able to decrease its collection float time on all cr

Question

8. Suppose that ABC Inc. is able to decrease its collection float time on all credit sales by 4 days. What effect would this have on the present value of ABC's credit sales, all else being equal? Answer choices: increase, decrease, remain constant, cannot be determined

9. In general, an increase in the cash conversion period will lead to an increase in shareholder wealth. True or False

15. XYZ Corporation's inventory balance for the beginning of the month was $25,000. Over the course of the month, XYZ purchased $10,000 in inventory and its cost of goods sold was $17000. Find XYZ's end of the month inventory value.  

19. Jones Inc. sent a payment to its supplier on 8/25/18, but the supplier does not receive their money until 8/31/18. All else being equal, this delay decreases the present value of the payment from the supplier's perspective. True or False

Explanation / Answer

8. The present value of ABC's credit sales will increase because the decrease in days by 4 days shall lead to a lower discounting and therefore lead to a higher present value.

9. The staatement is FALSE ,an increase in the cash conversion period will not lead to an increase in shareholder wealth.

15. Cost of goods sold = opening inventory + purchases during the period - closing inventory

$17000 = $25000 + $10000 - closing inventory

Therefore closing inventory = $18000

19. The statement is TRUE as delay in receiving payment by supplier will lead to higher discounting and therefore present value will decrease.

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