Answered: cash conversion cycle

Business

Accounting

cash conversion cycle

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter18: The Management Of Accounts Receivable And Inventories

Section: Chapter Questions

Problem 10P

See similar textbooks

Related questions

Q: The Berry Corporation is considering a change in its cash-only policy. The new terms would be net…

A: Profit under current Policy: Price per unit – Cost per unit $65- $35 =$30 Profit for 2750 units:…

Q: merican Products is concerned about managing cash efficiently. On the average, inventories have an…

A: The cash conversion cycle makes evaluating a company's operational effectiveness in managing its…

Q: Ruth Company currently has $1,000,000 in accounts receivable. Its days sales outstanding (DSO) is 50…

A: Accounts receivables is amount owed to an organization by its customers, who received goods or…

Q: Shulman Inc. has the following data, in thousands. Assuming a 365-day year, what is the firm's cash…

A: Assume 365 Days in Year Annual sales = $45,000 Annual cost of goods sold = $30,000 Inventory =…

Q: Calculate the cash conversion cycle. Round your answer to the nearest whole number. days…

A: Information Provided: COGS = $144,000 (60% of sales) Inventory Turnover = 30x Accounts Receivable =…

Q: The following projected 2022 figures were provided to you by the Marikit Company for analysis : (80%…

A: Average collection period shows the number of days required to collect the account receivable.…

Q: Zahoor Industries turns over its inventory 6 times each year; it has an average collection period of…

A: Cash conversion cycle shows the amount of time taken for the firm to convert the investment in…

Q: A Company's credit sales policy is to have: 50% of the sales amount in cash 30% collected after one…

A: Following are the requisite answers

Q: The Geller Company has projected the following quarterly sales amounts for the coming year Q1 $690…

A: a) 45-days collection period Q1 Q2 Q3 Q4 Beginning receivables 450 345 360 390 Sales 690 720…

Q: Nevergreen's standard terms on sales invoices are 30 days, but analysis has shown that on average…

A: Receivables Management: It is the collections due for Sales in a timely manner Credit policy…

Q: Garrett Industries turns over its inventory six times each year; it has an average collection period…

A: Cash conversion cycle =Days of inventory outstanding (DIO) + Days sales outstanding (DSO) - Days…

Q: As an operations management consultant, you have been asked to evaluate a furniture manufacturer's…

A: Cash to cash conversion cycle It measures the time span required for a company to convert its cash,…

Q: For April, Anderson Antiques will have cash receipts of $365,000 and cash disbursements of $370,000.…

A: Net Cash Flow for the Month = Cash Receipts - Cash Disbursements Net Cash Flow for the Month =…

Q: Based on Robichek et al. (1965). The Korvair Department Store has $100,000 in available cash. At the…

A: Interest is a component of money paid by a firm or an individual over and above the principal.…

Q: Dome Metals has credit sales of $288,000 yearly with credit terms of net 120 days, which is also the…

A: The net income is the income that is received after deducting all the cost and expense from the…

Q: Timko has a 90-day collection period and produces seasonal merchandise. Sales are lowest during the…

A: Collection Period = 90 days Lowest sales = In quarter 1 Highest sales = In quarter 2 A quarter…

Q: A CARDBOARD BOX FACTORY pays its suppliers 40 days after making the purchase and receiving the…

A: The question is related to Operating cycle in Working Capital Management. Since you have posted a…

Q: The management of Kirkut Enterprises prepared the following forecasted total sales schedule for the…

A: Cash Sales: Cash sales are transactions in which the buyer pays immediately. Bills, coins, cheques,…

Q: 1.A financial analyst for Carroll Company has prepared the following sales and cash disbursement…

A: Cash budget is a pre-planned record of expenditures and revenues. It is used to estimate the…

Q: Brevard Inc is considering changing its credit terms from net 55 to net 30 to bring its terms in…

A: Cost of Carrying Receivables = Sales * DSO/ Total number of Days * Variable Cost * Opportunity Cost…

Q: Bulawan Coin, Inc. is considering shortening its credit period from 30 days to 20 days and believes,…

A: “Since you have posted a question with multiple sub-parts, we will solve the first three sub-parts…

Q: Georgie Ltd currently offers credit terms of 50 days to all of its customers. In practice, their…

A: Given, The average inventory is 102,000 Cost of sales 759,000 Average trade payables 72,000

Q: BMC Co. has an average A/R balance of P1,250,000, average inventory balance of P1,750,000, and…

A: Cash conversion cycle helps in measuring how long a company will be deprived of cash if in order to…

Q: A firm has an average age of inventory of 100 days, an average collection period of 40 days, and an…

A: The cash conversion cycle is calculated by adding the average age inventory, average collection…

Q: Sharam Industries has a 120-day operating cycle. If its average age of inventory is 50 days, how…

A: operating cycle is sum of inventory period and average collection period.This is time required to…

Q: Skylark Industries has P6,000,000 in inventory and P3,000,000 in accounts receivable. The company…

A: GIVEN INVENTORY=P6000,000ACCOUNTS RECEIVABLES=P3000,000SALES=P100,000DPO=30 DAYS

Q: Ingraham Inc. currently has $205,000 in accountsreceivable, and its days sales outstanding (DSO) is…

A: Calculate the current sales as shown below: Hence, the current sales are $1,053,873.239.

Q: f the days inventory is 50, days receivable is 17 and days payable is 25 and assuming 365 days in a…

A: Cash conversion cycle can be calculated by using this equation Cash conversion cycle(CCC) =Average…

Q: Last month, Bluesky announced that it would stretch out its bill payments from 30days to 45days. The…

A: Working capital management is an important financial decision for any corporate entity. Working…

Q: Brothers Breads has the following data. What is the firm's cash conversion cycle? Inventory…

A: Financial Management: Financial management comprises of two words i.e. Finance and management.…

Q: Bulldogs Inc. has a normal operating cycle of 32 days and cash conversion cycle of 25 days. Which of…

A: Formula - Cash operating cycle = The no. Of inventory days + Receivable days - payable Days

Q: A Mikey's sells $119,500 of its accounts receivable to factors at a 1% discount. The firm’s average…

A: The factoring services are used by the business to sell out their account receivables at a discount…

Q: What is the maximum level of accounts receivable that ALei can carry and have a 35-day average…

A: Answer a: Average collection period = Accounts receivableAnnual credit…

Q: You have recently been hired to improve the performance of MJ Cor., which has beeH shortage. As one…

A: The cash conversion cycle has three main components and the relationships are Cash conversion…

Q: Company’s average age of accounts receivable is 40 days, while the average age of accounts payable…

A: Introduction:- The following formula used to calculate the length of its cash conversion cycle as…

Q: Bulawan Coin, Inc. is considering shortening its credit period from 30 days to 20 days and believes,…

A: Total cost is sum of variable cost plus fixed cost and at breakeven point total cost must be equal…

Q: Gardner Company currently makes all sales on credit and offers no cash discount. The firm is…

A: Solution- Current sale=40,000 units*$45 Cash discount =22% (for 15 days) Current average collection…

Q: Altai, Inc has a cash conversion cycle of 175 days. The company is able to stretch its average…

A: Cash Conversion Cycle measures the duration in days that the company takes to convert its…

Q: Business operating cycle. Kolman Kampers has a production cycle of 31 days, a collection cycle of 22…

A: As you have posted a question with multiple sub-parts, we will solve the first three sub-parts for…

Q: Suppose that LilyMac Photography has annual sales of $233,000, cost of goods sold of $168,000,…

A: Introduction: The cash cycle is the amount of time it takes a business to convert raw resources into…

Q: Lolymino's customers are required to pay on 30 days, but on average pay on 45 days. Total sales…

A: Average Payment received from customers = 45 days Total Sales Revenue = £4,500,000 Bad Debts =£…

Q: Berry Manufacturing turns over its inventory 8 times each year, has an Average Payment Period of 35…

A: To Find: Firm's Operating cycle Cash conversion cycle Daily Cash operating expenditure

Q: Business operating cycle. Stewart and Company currently has a production cycle of 33 days, a…

A: Cash flows are the cash generated from the operation of the business organisation. In other words,…

Q: Simpson Corporation expects to sell the following number of units of their newest product: Year…

A: Excel Spreadsheet:

Q: 1. Raviolli Enterprise has an average age of accounts receivable is 45 days. The average age of…

A: Formula: Cash Conversion Cycle (CCC)= DRO+DIO- DPO where, DRO days of Receivables…

Q: Ingraham Inc. currently has $500,000 in accounts receivable, and its days sales outstanding (DSO) is…

A: Formula of Days sales outstanding is as follows: Days sales outstanding =Average accounts…

Concept explainers

Inventory Accounting

Inventory accounting is that branch of accounting that helps in determining the specific value of assets at different stages of production and development.

Question

Bulldogs Inc. has a normal operating cycle of 32 days and cash conversion cycle of 25 days. Which of the following must be true if the company wants to shorten its cash conversion cycle to 20 days?

A. Decrease the operating profit by 2%

B. Increase the age of inventory by 5 day

C. Decrease the days sales outstanding by 5 days

D. Increase the accounts payable deferral period by 2 days

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

SEE SOLUTION Check out a sample Q&A here

Formula to calculate cash conversion cycle

VIEW

Evaluation of options

VIEW

Answer

VIEW

Step by step

Solved in 3 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.

Similar questions

Ranger Industries has provided the following information at June 30: Other information: Average selling price, 196 Average purchase price per unit, 110 Desired ending inventory, 40% of next months unit sales Collections from customers: In month of sale20% In month after sale50% Two months after sale30% Projected cash payments: Inventory purchases are paid for in the month following acquisition. Variable cash expenses, other than inventory, are equal to 25% of each months sales and are paid in the month of sale. Fixed cash expenses are 40,000 per month and are paid in the month incurred. Depreciation on equipment is 2,000 per month. REQUIREMENT You have been asked to prepare a master budget for the upcoming quarter (July, August, and September). The components of this budget are a monthly sales budget, a monthly purchases budget, a monthly cash budget, a forecasted income statement for the quarter, and a forecasted September 30 balance sheet. The worksheet MASTER has been provided to assist you. Ranger Industries desires to maintain a minimum cash balance of 8,000 at the end of each month. If this goal cannot be met, the company borrows the exact amount needed to reach its goal. If the company has a cash balance greater than 8,000 and also has loans payable outstanding, the amount in excess of 8,000 is paid to the bank. Annual interest of 18% is paid on a monthly basis on the outstanding balance.
The following four suggestions have been made to improve the company’s cash position. Evaluate the effect on cash flow for each of the four suggestions. After evaluating each suggestion, enter the projected cash balances in the spaces provided. Consider each suggestion separately. Reset cells to their initial values after each new suggestion. Seek agreement with suppliers to extend the credit period to 30 days. This would mean that all current monthly purchases would be paid for in the following month. Raise the unit price from $28 to $30. A price increase will reduce unit sales by 10% each month. Unit purchases will also be reduced by 10%. Put the company’s two salespeople on straight commission. This would reduce fixed marketing and administrative costs to $1,500 per month and raise variable marketing and administrative costs to $7 per unit. Increase the cash discount from 5% to 10%. It is anticipated that this would increase the percentage of customers paying within the discount period to 85%, and those paying the month after the discount period would drop to 8%. Five percent would pay in the following month and 2% would still be uncollectible. What are your recommendations for Sweet Pleasures, Inc.? Consider potential impact on profits as well as cash balances.
The Raattama Corporation had sales of $3.5 million last year, and it earned a 5% return (after taxes) on sales. Recently, the company has fallen behind in its accounts payable. Although its terms of purchase are net 30 days, its accounts payable represents 60 days’ purchases. The company’s treasurer is seeking to increase bank borrowing in order to become current in meeting its trade obligations (that is, to have 30 days’ payables outstanding). The company’s balance sheet is as follows (in thousands of dollars): How much bank financing is needed to eliminate the past-due accounts payable? Assume that the bank will lend the firm the amount calculated in part a. The terms of the loan offered are 8%, simple interest, and the bank uses a 360-day year for the interest calculation. What is the interest charge for 1 month? (Assume there are 30 days in a month.) Now ignore part b and assume that the bank will lend the firm the amount calculated in part a. The terms of the loan are 7.5%, add-on interest, to be repaid in 12 monthly installments. What is the total loan amount? What are the monthly installments? What is the APR of the loan? What is the effective rate of the loan? Would you, as a bank loan officer, make this loan? Why or why not?
Gear Up Co. pays 65% of its purchases in the month of purchase, 30% in the month after the purchase, and 5% in the second month following the purchase. What are the cash payments if it made the following purchases in 2018?