Koch Engineering plc has produced the following information for its most recent financial year: E (Click here to view the financial data.) Following a review of the working capital investment of the business, it was decided that liquidity could be improved if the following changes were made: 1. An decrease in the average settlement period for trade receivables to 35 days. 2. An increase in the average settlement period for trade payables to 50 days. 3. A decrease in the average inventories turnover period to 55 days. Calculate the extra cash that the business should generate by implementing each of the proposed changes. (Enter the answes in £m, round to one decimal place.) Trade receivables = £ m Trade payables = £m Inventories = :

Koch Engineering plc has produced the following information for its most recent financial year: E (Click here to view the financial data.) Following a review of the working capital investment of the business, it was decided that liquidity could be improved if the following changes were made: 1. An decrease in the average settlement period for trade receivables to 35 days. 2. An increase in the average settlement period for trade payables to 50 days. 3. A decrease in the average inventories turnover period to 55 days. Calculate the extra cash that the business should generate by implementing each of the proposed changes. (Enter the answes in £m, round to one decimal place.) Trade receivables = £ m Trade payables = £m Inventories = :

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter21: Supply Chains And Working Capital Management

Section: Chapter Questions

Problem 12P: Strickler Technology is considering changes in its working capital policies to improve its cash flow...

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Strickler Technology is considering changes in its working capital policies to improve its cash flow cycle. Stricklers sales last year were 3,250,000 (all on credit), and its net profit margin was 7%. Its inventory turnover was 6.0 times during the year, and its DSO was 41 days. Its annual cost of goods sold was 1,800,000. The firm had fixed assets totaling 535,000. Stricklers payables deferral period is 45 days. a. Calculate Stricklers cash conversion cycle. b. Assuming Strickler holds negligible amounts of cash and marketable securities, calculate its total assets turnover and ROA. c. Suppose Stricklers managers believe the annual inventory turnover can be raised to 9 times without affecting sale or profit margins. What would Stricklers cash conversion cycle, total assets turnover, and ROA have been if the inventory turnover had been 9 for the year?
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