Landis Apparel Co. Case 7
Current Asset Management
Purpose: The case illustrates the relationship between profitability and required investment. The
turnover ratio for accounts receivable is particularly important, with an investment in inventory also
included in the analysis. Sensitivity analysis is further considered in this case.
Relation to Text: The case should follow Chapter 7.
Complexity: The case is reasonably straight forward and requires 30-45 minutes.
Solutions
1. Additional sales $1,000,000
Accounts Uncollectible (5% of new sales) 50,000
4. No. The return on investment is only 11.70%, versus a required rate of return of 14%.
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent
of McGraw-Hill Education.
Yes. The return on investment is 15.60%, versus a required rate of return of 14%.
6. First compute the total investment
Accounts receivable $250,000
7. First compute the revised aftertax income
Additional sales $1,000,000
Accounts Uncollectible (5% of new sales) 50,000
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent
of McGraw-Hill Education.