1. Other things equal, the days sales outstanding (DSO) of Firm A is 20 days and the days sales outstanding (DSO) of Firm B is 30 days. Which of the following statements about the firms is correct??
a. ?Firm A has a weaker collection team than Firm B.
b. ?Firm A takes more time to collect its receivables than Firm B.
c. ?Firm A provides less discount to its customers to pay its bills early than Firm B.
d. ?Firm A has tighter credit terms than Firm B.
e. ?Firm A has weaker receivables monitoring system than Firm B.
2. Put the following cash flows in order of highest value (ex. #1 for the highest, #2 for the second highest, etc.). Assume money has a time value of 9% and there is no risk difference between the choices.
_____ $100,000 a year, for 5 years, first payment starting in one year.
_____ $90,000 a year, for five years, starting today with the first payment.
_____ Lump sum payment of $390,000 received 3 years from today.
_____ Lump sum payment of $600,000 received 8 years from today.
_____ Lump sum of $285,000 received today.