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a)
To determine: Net working capital for the year 2015.
Introduction:
Net working capital is the difference between the net current assets and the net current liabilities of the firm.
b)
To determine: The cash conversion cycle of G Company in the year 2015.
Introduction:
Cash cycle is also termed as cash conversion cycle, which measures the time taken to convert the cash into stocks, accounts payable, by way of sales and accounts receivables and again back to cash.
c)
To determine: The cash conversion cycle when the accounts receivable days are 30 days in addition to the COGS in 2015.
Introduction:
Cash cycle is also termed as cash conversion cycle, which measures the time taken to convert the cash into stocks, accounts payable, by way of sales and accounts receivables and again back to cash.
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Chapter 26 Solutions
EBK CORPORATE FINANCE
- 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, your estimate of the firm's current cash conversion cycle would be __________days Current Inventory = P120,000. Accounts receivable = P157,808. Accounts payable = P25,000. Annual sales P600,000. Total annual purchases = P365,000. Purchases credit terms: net 30 days. Receivables credit terms: net 50 days. O 100 O 49 O 144 O 168arrow_forwardExplain Step By Step Q1: Aztec Products wishes to evaluate its cash conversion cycle (CCC). Research by one of the firm’s financial analysts indicates that on average the firm holds items in inventory for 65 days, pays its suppliers 35 days after purchase, and collects its receivables after 55 days. The firm’s annual sales (all on credit) are about $2.1 billion, its cost of goods sold represent about 67 percent of sales, and purchases represent about 40 percent of cost of goods sold. Assume a 365-day year. A) If Dean Muhammad Suppliers receive an invoice for purchases dated 12/12/2002 subject to credit terms of "2/10, net 30", what is the last possible day the discount can be taken? January 11 January 22 January 30 December 22arrow_forwardYour consulting firm was recently hired to improve the performance of RP 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 Annual sales Annual cost of goods seld Average accounts receivable Average accunts payable P5.000 P00.000 PH0,000 P0,000 F5000 140.6 days 120.6 days 133.6 days 148.0 days O 126.9 daysarrow_forward
- Q4: Aztec Products wishes to evaluate its cash conversion cycle (CCC). Research by one of the firm's financial analysts indicates that on average the firm holds items in inventory for 65 days, pays its suppliers 35 days after purchase, and collects its receivables after 55 days. The firm's annual sales (all on credit) are about $2.1 billion, its cost of goods sold represent about 67 percent of sales, and purchases represent about 40 percent of cost of goods sold. Assume a 365- day year. a. What is Aztec Products' operating cycle (OC) and cash conversion (CCC)? b. How many dollars of resources does Aztec have invested in (1) inventory. (2) accounts receivable, (3) accounts payable, and (4) the total CCC? c. If Aztec could shorten its cash conversion cycle by reducing its inventory holding period by 5 days, what effect would it have on its total resource investment found in part b? d) If Dean Muhammad Suppliers receive an invoice for purchases dated 12/12/2002 subject to credit terms of…arrow_forwardQ1: Aztec Products wishes to evaluate its cash conversion cycle (CCC). Research by one of the firm’s financial analysts indicates that on average the firm holds items in inventory for 65 days, pays its suppliers 35 days after purchase, and collects its receivables after 55 days. The firm’s annual sales (all on credit) are about $2.1 billion, its cost of goods sold represent about 67 percent of sales, and purchases represent about 40 percent of cost of goods sold. Assume a 365-day year. a) If Dean Muhammad Suppliers receive an invoice for purchases dated 12/12/2002 subject to credit terms of "2/10, net 30", what is the last possible day the discount can be taken? January 11 January 22 January 30 December 22arrow_forwardQ1: Aztec Products wishes to evaluate its cash conversion cycle (CCC). Research by one of the firm’s financial analysts indicates that on average the firm holds items in inventory for 65 days, pays its suppliers 35 days after purchase, and collects its receivables after 55 days. The firm’s annual sales (all on credit) are about $2.1 billion, its cost of goods sold represent about 67 percent of sales, and purchases represent about 40 percent of cost of goods sold. Assume a 365-day year. a. What is Aztec Products’ operating cycle (OC) and cash conversion (CCC)?arrow_forward
- Q1: Aztec Products wishes to evaluate its cash conversion cycle (CCC). Research by one of the firm’s financial analysts indicates that on average the firm holds items in inventory for 65 days, pays its suppliers 35 days after purchase, and collects its receivables after 55 days. The firm’s annual sales (all on credit) are about $2.1 billion, its cost of goods sold represent about 67 percent of sales, and purchases represent about 40 percent of cost of goods sold. Assume a 365-day year. A. How many dollars of resources does Aztec have invested in (1) inventory, (2) accounts receivable, (3) accounts payable, and (4) the total CCC?arrow_forwardQ1: Aztec Products wishes to evaluate its cash conversion cycle (CCC). Research by one of the firm’s financial analysts indicates that on average the firm holds items in inventory for 65 days, pays its suppliers 35 days after purchase, and collects its receivables after 55 days. The firm’s annual sales (all on credit) are about $2.1 billion, its cost of goods sold represent about 67 percent of sales, and purchases represent about 40 percent of cost of goods sold. Assume a 365-day year. A) How many dollars of resources does Aztec have invested in (1) inventory, (2) accounts receivable, (3) accounts payable, and (4) the total CCC? B). If Aztec could shorten its cash conversion cycle by reducing its inventory holding period by 5 days, what effect would it have on its total resource investment found in part A?arrow_forwardRefer to Samsung’s statement of cash flows for the year ended December 31, 2017. 1. What amount (in millions of Korean won) did Samsung spend to acquire property, plant, and equipment during 2017? 2. Assume the investment in part 1 is expected to generate annual net cash flows of 7,000,000 (in millions of Korean won) per year for the next 10 years. Compute the net present value of the investment, using a discount rate of 9%.arrow_forward
- Aztec Products wishes to evaluate its cash conversion cycle (CCC). Research by one of the firm’s financial analysts indicates that on average the firm holds items in inventory for 65 days, pays its suppliers 35 days after purchase, and collects its receivables after 55 days. The firm’s annual sales (all on credit) are about R2.1 billion, its cost of goods sold represent about 67 percent of sales, and purchases represent about 40 percent of cost of goods sold. Assume a 365-day year. What is Aztec Products’ cash conversion (CCC)? If Aztec could shorten its CCC by 5 days, would it be best to reduce the inventory holding period, reduce the receivable collection period, or extend the accounts payable period? Why? How should the firm manage its inventory, accounts receivable, and accounts payable in order to reduce the length of its cash conversion cycle?arrow_forward.You have recently been hired to improve the performance of MJ Cor., which has been experiencing a severe cash shortage. As one part of your analysis, you want to determine the firm's cash conversion cycle. Data gathered were as follows: Current inventory : P120,000 Annual sales : P600,000 Accounts receivable : P157,808 : P25,000 : P365,000 : net 30 days : net 50 days. Accounts payable Total annual purchases Purchases credit terms Receivables credit terms Using 365-day year, the estimated current cash conversion cycle (in days) is?arrow_forwardIf a firm has sales of $21,764,000 a year, and the average collection period for the industry is 55 days, what should this firm’s accounts receivable be if the firm is comparable to the industry? Assume there are 365 days in a year. Do not round intermediate calculations. Round your answer to the nearest dollar.arrow_forward
- EBK CONTEMPORARY FINANCIAL MANAGEMENTFinanceISBN:9781337514835Author:MOYERPublisher:CENGAGE LEARNING - CONSIGNMENT
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