Homework answers / question archive / Suppose your firm receives a $5 million order on the last day of the year

Suppose your firm receives a $5 million order on the last day of the year

Finance

Share With

Suppose your firm receives a $5 million order on the last day of the year. You fill the order with $2 million worth of inventory. The customer picks up the entire order the same day and pays $1 million upfront in cash; you also issue a bill for the customer to pay the remaining balance of $4 million in 30 days. Suppose your firm’s tax rate is 0% (i.e., ignore taxes). Determine the consequences of this transaction for each of the following:

a.             Revenues

b.             Earnings

c.             Receivables

d.             Inventory

e.             Cash