Question 6 A firm may decide to eliminate the threat of a takeover by a major shareholder by purchasing shares from them at a premium, also known as a(n) _____. Open market purchase. Tender offer. Targeted repurchase. Greenmail. Question 7 The way a firm chooses between alternate uses of free cash flow is referred to as _____. Retention ratio ...
May 10, 2019 · If the weighted average cost of capital is 11% and Gonzales Corporation has cash of $100 million, debt of $300 million, and 100 million shares outstanding, what is Gonzales Corporation's expected free cash flow in year 2? Selected Answer: $96.24 million Correct Answer: $96.24 million Response Feedback: FCF 1 = 81 × (1 + 0.09) = 88.29; FCF 2 ...
Question 2 2 out of 2 points Which of the following is typically the major factor in limiting the growth of sole proprietorships? Selected Answer: The amount of money that can be raised by such firms is limited by the fact that the single owner must make good on all debts. Correct Answer: The amount of money that can be raised by such firms is limited by the fact that the …
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A) If the invoice is paid within 10 days a 2% discount can be taken. If the invoice is paid between 11 and 29 days a 1% discount can be taken. After 30 days the full invoice is due.
E) No , since the percentage of payments that are on time is equal to the percentage of payments that are late.
B) Yes , since it, on average, takes the discount, and pays at the end of the discount period.
These are firms that have a relatively long time between the time purchased inventory is paid for and the time that inventory is sold and payment received. Thus, these are firms that have relatively short payables periods and/or relatively long receivable cycles.
The payables period is a subject of much negotiation, and it is one aspect of the price a firm pays its suppliers. A firm will generally negotiate the best possible combination of payables period and price. Typically, suppliers provide strong financial incentives for rapid payment.
BlueSky will need less financing because it is essentially borrowing more from its suppliers. Among other things, BlueSky will likely need less short-term borrowing from other sources, so it will save on interest expense.
Carrying costs will decrease because they are not holding goods in inventory. Shortage costs will probably increase depending on how close the suppliers are and how well they can estimate need. The operating cycle will decrease because the inventory period is decreased.
It is sometimes argued that large firms take advantage of smaller firms by threatening to take their business elsewhere. However, considering a move to another supplier to get better terms is the nature of competitive free enterprise.
Loftus Manufacturing Inc. has recently installed eight just in time JIT inventory system describe the fact this is likely to have on the companies carrying cost, shortage cost and operating cycle.
Since the cash cycle equals the operating cycle minus the accounts payable period, it is not possible for the cash cycle to be longer than the operating cycle if the accounts payable period is positive. Moreover, it is unlikely that the accounts payable period would ever be negative since that implies the firm pays its bills before they are incurred.