Vanity Press, Inc. has annual sales of 1,600,000 ( asume allsales are on credit)

Question

Vanity Press, Inc. has annual sales of 1,600,000 ( asume allsales are on credit) and a gross profit margin 05 35 percent. a) If the firm wishes to maintain an average collection periodof 50days, what level of accounts receivable should it carry?(Assume a 365-day year). b) The inventory turnover for this industry average six times.Waht average level of inventory should the firm maintain to achievethe same inventory turnover figure as the industry? Vanity Press, Inc. has annual sales of 1,600,000 ( asume allsales are on credit) and a gross profit margin 05 35 percent. a) If the firm wishes to maintain an average collection periodof 50days, what level of accounts receivable should it carry?(Assume a 365-day year). b) The inventory turnover for this industry average six times.Waht average level of inventory should the firm maintain to achievethe same inventory turnover figure as the industry?

Explanation / Answer

Pacific Fixtures lists the following accounts as part of itsbalance sheet. TotalAssests                                                  1,0000,000 Accountspayables                                         2,000,000 NotesPayables   (8%)                                    1,000,000 Long Term Debt(10%)                                   3,000,000 Common Stock atPar                                     1,000,000 Contributed capital in excess ofpar                    500,000 Reatinedearnings                                              2,500,000 Total Liablilties and stockholders'sequitry        10,000,000 Compute the return on stockholders' equity if the company hassales of $20 million and the following net profit million and thefollowing net profit margin: a) 3 percent b) 5 percent

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