Hampton Machine Tool Company

Answer: The average collection period is definitely a good indicator of future trends of payers. In this case, the ACP illustrates that the firm’s customers have changed their payment behavior in a positive way.

First, the expansion in the 1970s was financed by debt, much of it short term. This was the reason for its high (short-term) debt-value ratio. Although this might have been in line with Massey’s growth strategy, it made Massey sensible for the increase in the interest rates. This increase resulted in a dramatic rise of cost of Massey’s short-term debt.

Jackson is unable to repay its existing loan due to several reasons between August 2012 and May 2013. The first is the repurchase of stock at 10000 makes up 65 percent of the total use of funds. Half of the repurchase was made by using the bank loan as a source of funds, which increase the debt ratio two fold. This action also affects the debt equity ratio. Jackson is taking on more debt and raising less equity, which means it is becoming insolvent and is more difficult to make the loan payments or cover the interest expenses of the loan. Secondly, Jackson purchased significant inventories making up of the total use of funds. The purchase of the inventory changed the current ratio, which indicates that Jackson's short-tern loan paying ability

Generate the Repayment Plan, add at the bottom the 10 day time frame period for the customer.

In 1996, the company had secured a $100,000 revolving line of credit at the prime rate plus 1.5%, and a $390,000 five-year loan at a fixed rate of 9.25%. By the end of 1997, the loan outstanding balance was reduced to $315,000 and the monthly

The fifteen-year limitation period commences on the date stated in the lease agreement. For Mr Day, his agreement had stipulated that proceedings to collect unpaid amounts may start until the later of:

Moving on, WHCL uses IFRS and must increase expenses for the delay. WHCL at this point is using the finished method, also called %-of-completion, which is denied by IFRS. It was also explained in my interview that the employees had striked, delaying work by two weeks, thus increasing the chances of a penalty, as agreed upon. Since WHCL has seen an increase in the ratios close to the point of a penalty imposed by their debt covenants, they have the desire to manipulate their financial statements, called fraudulent financial reporting, and thus determining costs and revenues relating to the sales are essential in eliminating this risk. If WHCL is penalized by the delay, they may also be penalized by their covenants for failing to meet the requirements set out in the loan, and if they do fail, they must increase expenses and decrease its revenue to balance the effect of the penalty. Lastly, when using the finished method, or %-of-completion, WHCL must determine if their client can pay and if they can receive payment, as this is essential in both this case and in business in

Banks previously had not been held very accountable for the loans given. The banks were merely giving loans more

There are time limits on how long certain debts can be reported, and erroneous information is common. (-- removed HTML --)

From year 2012 to 2014, Apple had increased days ' sales uncollected from 25.49 to 34.86, while HP kept stable but higher than Apple. In fiscal year 2014, HP’s days’ sales uncollected was 45.30. Days ' sales uncollected indicate how quickly a company can convert its accounts receivable into cash. Apple would take about 35 days to collect cash from ending accounts receivable, while it would take HP about 45 days. HP has a higher days’ sales uncollected ratio than Apple, which means it had a large number of accounts receivable in hand. If the customers don’t pay back, those accounts would go to bad debt. Thus, Apple had a better management at cash than HP.

However, ones should bear in mind that trade debtors ' collection period and trade creditor 's settlement period provided the average figures which might not give a correct interpretation because both ratios could be distorted by a few large customers/suppliers who are very slow or fast payers/payees.

(Exhibit 5) This may only have a nominal effect on their current problem, but is a move they should make nonetheless. I have assumed they have not been doing this since they show no interest revenue on their income statement. This would not solve their short cash flow problems, but it would be a sound practice to implant for the future. A savings account is a safe nonvolatile place to have the money and it is instantly accessible to Hampton.

We bought raw materials beyond our immediate needs in July and August to be assured of completing our orders scheduled to be

The average payment period is 40.9 days higher than the industry average, and its accounts payable turnover is 2.59 times; therefore, providing that the company is paying its bills on time, Garners’ is reducing opportunity costs due to its debt management (Cornett, Adair, Nofsinger, 2015).

1. Outline the order of repayment of the company's debts and the effects (if any) of the charges outlined above.