Exam 6: Cash, Receivables, and the Time Value of Money

You invest $1,000 in a Canada Savings Bond.At the end of the first year you have $1,050, and at the end of the second year you have $1,100.00.This is an example of which of the following concepts?

Which of the following is an advantage of allowing customers to buy on credit?

Juan Gomez is a loans officer with the Canadian Bank.Yesterday Chris Anstey, the owner of Haines Meat Packing Ltd, met with Juan to discuss the possibility of Canadian Bank's opening up a $100,000 line of credit for the company to help with working capital management.Mr Anstey indicated that he would be willing to pledge his accounts receivable as security for the line of credit.Mr.Anstey presented Mr.Gomez with the following information related to the financial operations of Haines Meat Packing: Current Assets \ 450,000 Inventory \ 180,000 Current Liabilities 400,000 Average accounts receivable \ 245,000 Sales for 2008 \ 1,250,000 Percentage of sales on credit 75\% Mr.Gomez has done some research and discovered that similar businesses generally collect their accounts receivables within 45 days, have current ratios around 1.2 and quick ratios of .80. Required: A) Evaluate the liquidity of Haines Meat Packing. B) Is there any other information you would like to have? C) Assume the role of Juan Gomez; based on the information you do have, would you approve the line of credit? Explain your reasoning.

Sam lent his son $30,000 to help finance his education.The son must pay back the principal, but no interest, in 6 years.If Sam could have earned 5% in a GIC over the same period, the cost of their gift to their son is closest to: