What will be the net change in the cash conversion cycle, assuming a 365-day year?
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Jude Corp. has annual sales of P50,735,000, an average inventory level of P15,012,000, and average
-32.8 days
-29.5 days
-26.6 days
-40.5 days
-36.4 days
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- 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?Costco is the largest chain of membership warehouse clubs in the world, based on sales volume, and it is the fifth largest general retailer in the United States. Costco focuses on selling products at low prices, often at a very high volume. These goods are usually bulk-packaged and marketed primarily to large families and businesses. Costco became the first company to grow from zero to 3 billion in sales in less than six years. In a recent fiscal year, Costcos sales totaled 116 billion, a 2 percent increase from 2015, and its net income reached 2.35 billion, an 1 percent decrease from 2015. This information, and much more, can be derived from the financial statements that merchandising firms such as Costco prepare on a regular basis to provide shareholders and other interested parties information about the companys activities and financial performance. 1. What type of information would a classified income statement provide to shareholders and other interested parties? 2. What type of information would a classified balance sheet provide to shareholders and other interested parties? Why would this information be important for calculating the working capital and the current ratio, for example?Costco is the largest chain of membership warehouse clubs in the world based on sales volume, and it is the fifth largest general retailer in the United States. Costco focuses on selling products at low prices, often at a very high volume. These goods are usually bulk-packaged and marketed primarily to large families and businesses. Costco became the first company to grow from zero to 3 billion in sales in less than six years. In a recent fiscal year, Costcos sales totaled 76.3 billion, a 29.3 percent increase from 2006, and its net income reached 1.30 billion, an 18.1 percent increase from 2006. This information, and much more, can be derived from the financial statements that merchandising firms such as Costco prepare on a regular basis to provide shareholders and other interested parties information about the companys activities and financial performance. 1. What type of information would a classified income statement provide to shareholders and other interested parties? 2. What type of information would a classified balance sheet provide to shareholders and other interested parties? Why would this information be important for calculating the working capital and the current ratio, for example?
- Halifax Shoes has 30% of its sales in cash and the remainder on credit. Of the credit sales, 65% is collected in the month of sale, 25% is collected the month after the sale, and 5% is collected the second month after the sale. How much cash will be collected in August if sales are estimated as $75,000 in June, $65,000 in July, and $90,000 in August?Industria del Norte has receivable accounts of $ 42,300, inventory of $ 61,200, sales of $ 544,200, and COGS of $ 393,500. How many days on average does it take the firm to sell all of its inventory?Libscomb Technologies' annual sales are $6,750,624 and all sales are made on credit, it purchases $3,062,806 of materials each year (and this is its cost of goods sold). Libscomb also has $571,915 of inventory, $1,475,000 of accounts receivable, and $1,400,000 of accounts payable. Assume a 365 day year. What is Libscomb’s Receivables Period (in days)?
- Vanity Press, Inc., has annual credit sales of $1.9 million and a gross profit margin of 35 percent. Round your answers to the nearest dollar. If the firm wishes to maintain an average collection period of 60 days, what level of accounts receivable should it carry? (Assume a 365-day year.) $ The inventory turnover for this industry averages seven times. If all of Vanity’s sales are on credit, what average level of inventory should the firm maintain to achieve the same inventory turnover figure as the industry? $Viper Construction’s days sales outstanding is 50 days (on a 365-day basis). The company’s accounts receivable equal $100 million and its balance sheet shows inventory equal to $125 million. What is the average number of days that the receivables of Viper Construction remain outstanding before they are collected? *National Co. has an inventory conversion period of 60 days, a receivable conversion period of 35 days, and a payable payment period of 45 days. The National Co.’s variable cost ratio is 65% and annual fixed costs of P600,000. The current cost of capital for National Co. is 12%.If National Co.’s annual sales are P3,375,000 and all sales are on credit, what is the firm’s carrying cost on accounts receivable, using 360 days year?
