1 answer

Help me on the Finance homework. Please show me in excel. Assume that you are a...

Question:

Help me on the Finance homework. Please show me in excel.

Assume that you are a financial manager for Varsity Sweaters a wholesaler of university branded clothing to college and university book stores. On December 31, 2013 Varsity Sweaters had sold $2,500,000 in products on account to various campus book stores for year. Its collections policies are typically net 30 days. It had collected $1,000,000 by December 31, 2013. The clothing it had sold during the year had been purchased on account from various textile mills for $1,200,000 of that amount the firm had paid $950,000 as of December 31, 2013.

Enter the above financial information into Varsity Sweater’s General Ledger.

Using accrual accounting and the information above in the General Ledger what is the net profit for Varsity Sweater during the year 2013?

Using cash accounting and the information above in the General Ledger what is the net cash for Varsity Sweater during the year 2013?

Which of the statements you just calculated is most useful to the financial manager? Why?


Answers

File Home InsertPage LayoutFormulas DataReview View DeveloperNitro Pro8 5 EX 11.A. A-=-9- Ewrap Text General Copy Fill 田·ク·A·File Home Insert Page Layout﹁ Formulas Data Review View Developer Nitro Pro 5 EX a궈 Trace Precedents Eshow Formulas Trace Dep

What is more relevant for a Financial Manager:

For a Financial Manager, figure of profit is more relevant as compared to Cash Balance. Because, it is general practice of Varsity Sweaters to sold goods on credit basis for a period of 30 day and such credit period doesn't affects company's profitability i.e. profit of $1.30 million remains same (Whether company sold goods on credit basis or cash basis).

Further, Profit is a figure which can be use to assess Market price and various financial ratios of the company.

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