EBK PRINCIPLES OF MANAGERIAL FINANCE
14th Edition
ISBN: 8220100666759
Author: ZUTTER
Publisher: PEARSON
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Textbook Question
Chapter 15, Problem 15.2P
Learning Goal 2
P15-2 Changing cash conversion cycle Camp Manufacturing turns over its inventory 5 times each year, has an average payment period of 35 days, and has an average collection period of 60 days. The firm has annual sales of $3.5 million and cost of goods sold of $2.4 million.
- a. Calculate the firm’s operating cycle and cash conversion cycle.
- b. What is the dollar value of inventory held by the firm?
- c. If the firm could reduce the average age of its inventory from 73 days to 63 days, by how much would it reduce its dollar investment in working capital?
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K .1
As a newly appointed Chief Supply Chain Officer at YS Medical Devices, you want to figure out the company's cash-to-cash conversion cycle and make decision(s) to improve the company's performance. Here are pieces of financial data you may utilize:
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Operating weeks a year: 50
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Accounts payable: $3,695,000
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P15–1 CASH CONVERSION CYCLE American Products is concerned about managing cash efficiently. On average, inventories have an age of 80 days, and accounts receivable are collected in 40 days. Accounts payable are paid approximately 30 days after they arise. The firm has annual sales of about $30 million. Goods sold total $20 million, and purchases are $15 million.
Calculate the firm’s operating cycle.
Calculate the firm’s cash conversion cycle.
Calculate the amount of resources needed to support the firm’s cash conversion cycle.
Discuss how management might be able to reduce the cash conversion cycle.
Chapter 15 Solutions
EBK PRINCIPLES OF MANAGERIAL FINANCE
Ch. 15.1 - Why is working capital management one of the most...Ch. 15.1 - Prob. 15.2RQCh. 15.1 - Prob. 15.3RQCh. 15.2 - Prob. 15.4RQCh. 15.2 - Prob. 15.5RQCh. 15.2 - What are the benefits, costs, and risks of an...Ch. 15.2 - Prob. 15.7RQCh. 15.3 - Prob. 1FOPCh. 15.3 - Prob. 15.8RQCh. 15.3 - Briefly describe the following techniques for...
Ch. 15.3 - Prob. 15.10RQCh. 15.4 - Prob. 15.11RQCh. 15.4 - Prob. 15.12RQCh. 15.4 - What are the basic tradeoffs in a tightening of...Ch. 15.4 - Prob. 15.14RQCh. 15.4 - Prob. 15.15RQCh. 15.4 - Prob. 15.16RQCh. 15.5 - Prob. 1FOECh. 15.5 - Prob. 15.17RQCh. 15.5 - What are the firms objectives with regard to...Ch. 15.5 - Prob. 15.19RQCh. 15.5 - Prob. 15.20RQCh. 15.5 - Prob. 15.21RQCh. 15 - Prob. 1ORCh. 15 - EOQ analysis Thompson Paint Company uses 60,000...Ch. 15 - Learning Goal 4 ST15- 3 Relaxing credit standards...Ch. 15 - Prob. 15.1WUECh. 15 - Learning Goal 2 E15-2 Icy Treats Inc. is a...Ch. 15 - Prob. 15.3WUECh. 15 - Forrester Fashions has annual credit sales of...Ch. 15 - Prob. 15.1PCh. 15 - Learning Goal 2 P15-2 Changing cash conversion...Ch. 15 - Prob. 15.5PCh. 15 - EOQ, reorder point, and safety stock Alexis...Ch. 15 - Prob. 15.7PCh. 15 - Prob. 15.8PCh. 15 - Prob. 15.9PCh. 15 - Relaxation of credit standards Lewis Enterprises...Ch. 15 - Initiating an early payment discount Gardner...Ch. 15 - Prob. 15.12PCh. 15 - Lengthening the credit period Parker Tool is...Ch. 15 - Prob. 15.14PCh. 15 - Prob. 15.15PCh. 15 - Prob. 15.16PCh. 15 - Prob. 15.18P
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