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Answer Key For Working Capital
Answer Key For Working Capital
Answer Key For Working Capital
1.c
2.d
3.c
4.d
5.b
6.d
7.d
8.c
9.c
10.d
11.d
12.b
13.d
14.d
15.c
16.b
17.a
18.a
19 d
20.c
21.d
22.c
23.d
24.c
25.c
26.a
27.b
28.b
29.c
30.d
31.d
Problems:
1. A
Current Ratio = Current Assets/Current Liabilities
2 = Current Assets/ 400,000
Current Assets = Php 800,000
Current Ratio cannot be lower than 1.00 therefore the current liabilities can amount up to Php 800,000. Franz can secure a
liability amounting to Php 400,000 (800,000-400,000)
2. D.
Solution:
Php 320,000 (total assets) 260,000 (fixed assets)= 60,000 (current assets)
Long term financing = 260,000 +60,000
3. D
Solution:
Restristed
Current Assets
(400,000*.15)
(400,000*.25)
Fixed Assets
Total Assets
Relaxed
60,000
100,000
160,000
100,000
100,000
200,000
80,000
80,000
160,000
100,000
100,000
200,000
EBIT
Interest Rate
(.10*80,000)
(.10*100,000)
EBT
Tax (40%)
Net Income
36,000
36,000
(8,000)
28,000
(9,600)
16,800
(10,000)
26,000
(10,400)
15,600
Divide by Equity
Return to Equity
80,000
21%
80,000
15.6%
91 days
61 days
(19 days)
133 days
5. D
Solution:
Disbursement Float - (15,000 X 5)
Collection Float (17,000 x 3)
Net Float
75,000
(51,000)
24,000
6. D
Solution:
10 DAYS + 30 DAYS +40 DAYS / 3 = 26.67 days
7. A
8. A
Solution:
20,916.20 x 10% = 2,091.65
9. C
Solution:
Average collection period of CMR without central collection system (5+4+1.5) = 10.5 days
Average collection period of CMR with central collection system (3+1)
=4.0 days
Difference
6.5 days
Multiply by average daily collection
100,000
Increase in average cash balance
650,000
10. D
Solution:
Cost of Checks per day (200 x 500) =
Multiply by (reduction in processing time 2+.5)
Php100,000
2.5
Total
Multiply by annual interest rate
Annual Savings
Php 250,000
x
.06
Php 15, 000
11. B
Solution:
Daily Cash Receipts
Multiply by reduction in days
Savings
Multiply by money market rate
Interest Income
Less: Monthly fee (2500x12)
Additional Income (Loss)
Php 150,000
x
4
600,000
x
.04
24,000
(30,000)
(6,000)
12. B.
Solution:
Cost of daily payments ( 325 x 1,250)
Php406,250
Multiply: Saving in mailing and processing time (1.3 +0.9)
x 2.2 days
Total Gross Savings per day
893,750
Multiply by: daily interest rate
.021%
Total Daily Income
Php187.6875
Multiply by: Processing days in a year
x 250 days
Total Gross Annual Savings
Php46, 921.88
Less Annual Bank Charges: (.30*325*250)
(24,375.00)
Net Annual Savings
22,546.88
13. D
Solution:
Savings = 17,000 x 1 day = 17,000 x .14 = 2,380
14. A
15. C
16. D
Solution:
AR Turnover
Average Receivable
New
=360/50
=7.2 times
=(60M x .95)/7.2
=7,916,666.67
Difference = (14,583,333.33 7,916,666.67)
= 6,666,666.67 (decrease)
Old
=360/75
=4.8 times
=70M/4.8
= 14,583,333.33
17. D
Solution:
AR Turnover
Accounts Receivable
Old
=360/30
= 12 times
New
=360/45
= 8 times
=76,800,000/12
= 6,400,000
= (76,800,000x1.30)/8
= 12,480,000
1,000,000
700,000
300,000
50,000
150,000
100,000
35,000
65,000
19. B
Solution:
10% slow payers
.22 (.10) + .05(.90)
= .022+.045
=.067 x 3000 accounts = 201 accounts
20. C