Answer and Explanation:
The company handles the credit accounts including methods of invoicing and collecting past-due accounts, is indicated by the collection policy as it includes the net days given to the customers
Now if the customer pays the cash within eight days after the sale, the amount of cash paid is
= $100,000 × 0.99
= $99,000
And, if payment is made after 15 days so no discount would be given as it is exceeded the prescribed time limit i.e 10 days. So in this case the $100,000 cash is paid
Now the days sales outstanding is
= 0.30 × 10 + 0.70 × 35
= 3 +24.5
= 27.50 days
Answer:
Midwestern Mutual Bank's Balance Sheet
Equity:
Owners' Equity - $100
Liabilities:
Deposits $1,200
Debts $200
Total - $1,400
Equity and Liabilities = $1,500
Assets:
Reserves - $150
Loans $600
Securities $750
Total Assets - $1,500
a) If a new customer adds $100 to his account, this would increase the loans account with $100 and the deposits account with $100.
b) The leverage ratio is the measure of the bank's core capital to total assets.
Old leverage ratio = 100 / 1500 x 100% = 6.67%
The new leverage ratio is 100 / 1600 x 100% = 6.25%.
c) The intended goal of capital requirement is protect the interests of those who hold equity in the bank.
Explanation:
Banks are highly leveraged. This means that they usually maintain high leverage ratios. The liabilities are always much compared to the capital.
Leverage ratio is the ratio of a bank's core capital (shareholders equity) to its total assets.
This is why the Federal Reserve introduces capital requirements for banks. This tries to protect shareholders' equity that is usually written down when leverage ratios increase. This is because the capital portion of assets to which the debts are tied can be written down, but the debts cannot.
