A company has total annual sales (25% on cash basis)

| October 13, 2018

1. A company has total annual sales (25% on cash basis) of Rs.3, 000,000 and a gross profitmargin of 20 percent. Its current assets are Rs.500, 000; current liabilities,Rs.340, 000; inventories, Rs.260, 000; and cash, Rs.60, 000..Required;a. How much average inventory should be carried if management wants the inventory turnover tobe 5?b. How rapidly (in how many days) must accounts receivable be collected if management wantsto have an average of Rs.240, 000 invested in receivables?(Assume a 365-day year.)2. Emerson Commack is considering two different saving plans. The first plan would have hisdeposit Rs.750 every quarter, and he would receive interest at an 8 percent annual rate,compounded quarterly. Under the second plan he would deposit Rs.1, 500 every six months witha rate of interest of 8.5 percent, compounded semiannually. Suppose the initial deposits with boththe plans are made now.Required;a. What is the future value of the first plan at the end of 6 years?b. What is the future value of the second plan at the end of 6 years?c. Which plan should Emerson Commack use, assuming that his only concern is with the valueof his savings at the end of 6 years?

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