EBK FUNDAMENTALS OF CORPORATE FINANCE A
10th Edition
ISBN: 9780100342613
Author: Ross
Publisher: YUZU
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Question
Chapter 18, Problem 4QP
Summary Introduction
To determine: The impact of following actions in the operating cycle and cash cycle
Introduction:
Cash cycle: The time between the cash disbursement and cash collection is termed as cash cycle. The formula to calculate the cash cycle is as follows:
Operating cycle:
The phase, which takes time to complete the process from initial outlay of cash to produce, sell, and receive money from customers are termed as operating cycle. The formula to calculate operating cycle is as follows:
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Indicate the impact of the following on CASH and OPERATING Cycles, respectively. Use letter (I) to indicate an increase, the letter (D) for a decrease, or the letter (N) for no change.
___;___ a) The cash discounts offered by suppliers are increased: thus, payments are made earlier.
___;___ b) An increasing number of customers begin to py in cash instead of with credit.
___;___ c) Fewer raw materials than usual are purchased.
___;___ d) A greater percentage of raw material purchases are paid for with credit.
___;___ e) More finished goods are produced for inventory instead for order.
In the case of decrease the operating cash cycle, which one of the following actions should be taken?
A Delay payments to suppliers B Increase the inventory level while maintaining constant salesC Increase the period of time for which credit is granted to customers
D Decrease the rate at which the average inventory is sold
Which of the following statement is true ?
Answer choices :
I. Increase in collection of cash from customer will lead to decrease in days of payable outstanding .
II . Increase in credit sales of the company will lead to increase in days of payable outstanding .
III . Decrease in average accounts payable will cause decrease in accounts payable turnover ratio .
IV . All the above statements are false .
Chapter 18 Solutions
EBK FUNDAMENTALS OF CORPORATE FINANCE A
Ch. 18.1 - What is the difference between net working capital...Ch. 18.1 - Prob. 18.1BCQCh. 18.1 - List five potential sources of cash.Ch. 18.1 - Prob. 18.1DCQCh. 18.2 - Prob. 18.2ACQCh. 18.2 - Prob. 18.2BCQCh. 18.2 - Prob. 18.2CCQCh. 18.3 - What keeps the real world from being an ideal one...Ch. 18.3 - What considerations determine the optimal size of...Ch. 18.3 - Prob. 18.3CCQ
Ch. 18.4 - Prob. 18.4ACQCh. 18.4 - Prob. 18.4BCQCh. 18.5 - Prob. 18.5ACQCh. 18.5 - Describe two types of secured loans.Ch. 18.6 - Prob. 18.6ACQCh. 18.6 - In Table 18.6, what would happen to Fun Toys...Ch. 18 - Prob. 18.1CTFCh. 18 - A firm has an operating cycle of 64 days and a...Ch. 18 - Prob. 18.4CTFCh. 18 - Prob. 18.5CTFCh. 18 - Operating Cycle [LO1] What are some of the...Ch. 18 - Prob. 2CRCTCh. 18 - Prob. 3CRCTCh. 18 - Cost of Current Assets [LO2] Loftis Manufacturing,...Ch. 18 - Operating and Cash Cycles [LO1] Is it possible for...Ch. 18 - Use the following information to answer Questions...Ch. 18 - Use the following information to answer Questions...Ch. 18 - Prob. 8CRCTCh. 18 - Use the following information to answer Questions...Ch. 18 - Use the following information to answer Questions...Ch. 18 - Changes in the Cash Account [LO4] Indicate the...Ch. 18 - Prob. 2QPCh. 18 - Changes in the Operating Cycle [LO1] Indicate the...Ch. 18 - Prob. 4QPCh. 18 - Prob. 5QPCh. 18 - Prob. 6QPCh. 18 - Prob. 7QPCh. 18 - Prob. 8QPCh. 18 - Prob. 9QPCh. 18 - Prob. 10QPCh. 18 - Prob. 11QPCh. 18 - 12. Sources and Uses [LO4] Below are the most...Ch. 18 - Prob. 13QPCh. 18 - Prob. 14QPCh. 18 - 15. Calculating the Cash Budget [LO3] Wildcat,...Ch. 18 - Prob. 16QPCh. 18 - Prob. 17QPCh. 18 - Prob. 18QPCh. 18 - Prob. 1MCh. 18 - Prob. 2MCh. 18 - Prob. 3M
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