Foundations Of Finance
10th Edition
ISBN: 9780134897264
Author: KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher: Pearson,
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Chapter 11, Problem 6SP
Summary Introduction
To determine: The project’s
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Your consulting firm was recently hired to improve the performance of Realyou Inc, which is highly profitable but has been experiencing cash shortages due to its high growth rate. As one part of your analysis, you want to determine the firm’s cash conversion cycle. Using the following information and a 365-day year, what is the firm’s present cash conversion cycle?
Average inventory P75,000
Annual sales 500,000
Annual cost of goods sold 360,000
Average accounts receivable 160,000
Average accounts payable 25,000
You have recently been hired to improve the performance of Multiplex Corporation, which has been experiencing a severe cash shortage. As one part of your analysis, you want to determine the firm’s cash conversion cycle. Using the following information and a 365-day year,(a) what is your estimate of the firm’s current cash conversion cycle?
• Current inventory =
$ 180,000.00
• Annual sales =
$ 700,000.00
• Accounts receivable =
$ 165,000.00
• Accounts payable =
$ 85,000.00
• Total annual purchases =
$ 567,000.00
• Purchases credit terms: net 30 days.
• Receivables credit terms: net 50 days.
Cash management is a very important function of managers. Companies need to manage their operations in a way that they can sustain growth and yet not run out of cash.
Consider the case of the Red Hamster Manufacturing Inc.:
Red Hamster Manufacturing Inc. has forecasted sales of $30,000,000 for next year and expects its cost of goods sold (COGS) to remain at 80% of sales. Currently, the firm holds $2,800,000 in inventories, $2,200,000 in accounts receivable, and $2,600,000 in accounts payable.
Approximately how long does it take Red Hamster Manufacturing to convert its raw materials to its finished products and then to sell those goods? (Note: Use 365 days as the length of a year in all calculations, and round all values to two decimal places.)
a) 42.58 days
b) 40.45 days
c) 38.32 days
d) 31.94 days
On average, it takes (___) from the time a sale is made until the time cash is collected from customers.
Red Hamster Manufacturing…
Chapter 11 Solutions
Foundations Of Finance
Ch. 11.A - Prob. 1MCCh. 11.A - Prob. 2MCCh. 11 - Prob. 1RQCh. 11 - Prob. 2RQCh. 11 - If a project requires an additional investment in...Ch. 11 - Prob. 4RQCh. 11 - Prob. 5RQCh. 11 - Prob. 6RQCh. 11 - Prob. 1SPCh. 11 - (Relevant cash flows) Captins Cereal is...
Ch. 11 - Prob. 3SPCh. 11 - Prob. 4SPCh. 11 - Prob. 5SPCh. 11 - Prob. 6SPCh. 11 - Prob. 7SPCh. 11 - Prob. 9SPCh. 11 - Prob. 10SPCh. 11 - Prob. 11SPCh. 11 - Prob. 12SPCh. 11 - Prob. 15SPCh. 11 - (Real options and capital budgeting) You have come...Ch. 11 - (Real options and capital budgeting) Go-Power...Ch. 11 - (Real options and capital budgeting) McDoogals...Ch. 11 - (Risk-adjusted NPV) The Hokie Corporation is...Ch. 11 - (Risk-adjusted discount rates and risk classes)...Ch. 11 - Prob. 1MCCh. 11 - Prob. 2MCCh. 11 - Prob. 3MCCh. 11 - Prob. 7MCCh. 11 - Prob. 8MCCh. 11 - Prob. 9MCCh. 11 - Should the project be accepted? Why or why not?Ch. 11 - Prob. 11MCCh. 11 - Prob. 12MCCh. 11 - Prob. 13MCCh. 11 - Prob. 14MC
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