FINANCIAL MANAGEMENT: Working Capital Management
FIN3702
Semester 1 & 2
Department of Finance,
Risk Management and banking
, QUESTION 1
Taffy Bags was extended credit terms of 2/10 net 60. The approximate cost of giving up the
cash discount, assuming a 365-day year is …
1. 6.10%.
2. 7.20%.
3. 12.20%.
4. 14.90%.
CD 365
Cost of giving up a cash discount = x
(100 - CD) N
= 2/98 x 365/50
= 14.90 %
QUESTION 2
Dash Ltd had actual sales in November of R100 000 and projected sales in December and
January of R300 000 and R400 000 respectively. 10% of sales are collected during the month of
sale, 40% are collected in the month following the month of sale and the balance is collected
two months following the sale. The firm’s total expected receipts in January are …
1. R 70 000.
2. R108 000.
3. R210 000.
4. R610 000.
Total receipts of January
November December January
Month of sale 10% 10 000 30 000 40 000
Lagged 1 month 40% 40 000 120 000
Lagged 2 months 50% 50 000
Total receipts 210 000
FIN3702
Semester 1 & 2
Department of Finance,
Risk Management and banking
, QUESTION 1
Taffy Bags was extended credit terms of 2/10 net 60. The approximate cost of giving up the
cash discount, assuming a 365-day year is …
1. 6.10%.
2. 7.20%.
3. 12.20%.
4. 14.90%.
CD 365
Cost of giving up a cash discount = x
(100 - CD) N
= 2/98 x 365/50
= 14.90 %
QUESTION 2
Dash Ltd had actual sales in November of R100 000 and projected sales in December and
January of R300 000 and R400 000 respectively. 10% of sales are collected during the month of
sale, 40% are collected in the month following the month of sale and the balance is collected
two months following the sale. The firm’s total expected receipts in January are …
1. R 70 000.
2. R108 000.
3. R210 000.
4. R610 000.
Total receipts of January
November December January
Month of sale 10% 10 000 30 000 40 000
Lagged 1 month 40% 40 000 120 000
Lagged 2 months 50% 50 000
Total receipts 210 000
