Questions dealing with finance

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The Greek Connection had sales of $32 million in 2012, and a cost of goods sold of $20 million. A simplified balance sheet for the firm appears below:

THE GREEK CONNECTION

Balance Sheet

As of December 31, 2012 (in $ thousand)

Assets

Liabilities and Equity

Cash

Accounts receivable

Inventory

$ 2,000

  3,950

  1,300

Accounts payable

Notes payable

Accruals

$ 1,500

  1,000

  1,220

Total current assets

 

$  7,250

 

Total current liabilities

Long-term debt

$  3,720

  3,000

Net plant, property,

and equipment

 

$  8,500

Total liabilities

Common equity

$  6,720

  9,030

Total assets

$ 15,750

Total liabilities and equity

$ 15,750

 

a.

      Calculate The Greek Connection’s net working capital in 2012.

   

   

      b.

      Calculate the cash conversion cycle of The Greek Connection in 2012.

   

   

      c.

      The industry average accounts receivable days is 30 days. What would the cash conversion cycle for The Greek Connection have been in 2012 had it matched the industry average for accounts receivable days

 

 

 

5. Assume the credit terms offered to your firm by your suppliers are 3/5, Net 30. Calculate the cost of the trade credit if your firm does not take the discount and pays on day 30.

 

6. Your supplier offers terms of 1/10, Net 45. What is the effective annual cost of trade credit if you choose to forgo the discount and pay on day 45?

 

10. The Manana Corporation had sales of $60 million this year. Its accounts receivable balance averaged $2 million. How long, on average, does it take the firm to collect on its sales?

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