3. Margetis Inc. carries an average inventory of $750,000. Is annual sales are S10 million, its cost of goods sold are 75% of annual sales, and its receivables collection period is twice as long as its inventory conversion period. The firm buys on terms of net 30 days, and it pays on time. Its new CFO wants to decrease the cash conversion cycle by 6 days, based on a 365-day year. He believes he can reduce the average inventory to $627,465 with no effect on sales. By how much must the firm also reduce its accounts receivable to meet its goal in the reduction of its cash conversion cycle? a $1,004 b. $943 e. $823 d. S1,224 e. $763

3. Margetis Inc. carries an average inventory of $750,000. Is annual sales are S10 million, its cost of goods sold are 75% of annual sales, and its receivables collection period is twice as long as its inventory conversion period. The firm buys on terms of net 30 days, and it pays on time. Its new CFO wants to decrease the cash conversion cycle by 6 days, based on a 365-day year. He believes he can reduce the average inventory to $627,465 with no effect on sales. By how much must the firm also reduce its accounts receivable to meet its goal in the reduction of its cash conversion cycle? a $1,004 b. $943 e. $823 d. S1,224 e. $763

Corporate Fin Focused Approach

5th Edition

ISBN:9781285660516

Author:EHRHARDT

Publisher:EHRHARDT

Chapter16: Supply Chains And Working Capital Management

Section: Chapter Questions

Problem 11P

See similar textbooks

Similar questions

Margetis Inc. carries an average inventory of $825,000. Its annual sales are $11 million, its cost of goods sold are 75% of annual sales, and its receivables collection period is twice as long as its inventory conversion period. The firm buys on terms of net 30 days, and it pays on time. Its new CFO wants to decrease the cash conversion cycle by 20 days, based on a 365-day year. He believes he can reduce the average inventory to $677,245 with no effect on sales. By how much must the firm also reduce its accounts receivable to meet its goal in the reduction of its cash conversion cycle? Do not round your intermediate calculations. a. $341,239 b. $854,300 c. $454,985 d. $405,733 e. $394,013 Kirk Development buys on terms of 2/15, net 45 days. It does not take discounts, and it typically pays on time, 45 days after the invoice date. Net purchases amount to $350,000 per year. On average, what is the dollar amount of…
Margetis Inc. carries an average inventory of $750,000. Its annual sales are $10 million, its cost of goods sold are 75% of annual sales, and its receivables collection period is twice as long as its inventory conversion period. The firm buys on terms of net 30 days, and it pays on time. Its new CFO wants to decrease the cash conversion cycle by 18 days, based on a 365-day year. He believes he can reduce the average inventory to $605,885 with no effect on sales. By how much must the firm also reduce its accounts receivable to meet its goal in the reduction of its cash conversion cycle? Please explain the process and show calculations.
Margetis Inc. carries an average inventory of $750,000. Its annual sales are $10 million, its cost of goods sold are 75% of annual sales, and its receivables collection period is twice as long as its inventory conversion period. The firm buys on terms of net 30 days, and it pays on time. Its new CFO wants to decrease the cash conversion cycle by 6 days, based on a 365-day year. He believes he can reduce the average inventory to $635,450 with no effect on sales, By how much must the firm also reduce its accounts receivable to meet its goal in the reduction of its cash conversion cycle? Do not round your intermediate calculations. O a. $11,650 Ob.$11,417 O$13,980 Od $11,767 Oe. $13,398
Berry Manufacturing turns over its inventory 8 times each year, has an Average Payment Period of 35 days and has an Average Collection Period of 60 days. The firm’s annual sales are $3.5 million. Assume there is no difference in the investment per dollar of sales in inventory, receivable, and payables and that there is a 365-day year. A. How much resources must be invested to support its Cash Conversion Cycle? B. If the firm pays 14% for these resources, by how much would it increase its annual profits by favorably changing its Current Cash Conversion Cycle by 20 days.
2. Margetis Inc. carries an average inventory of $750,000. Its annual sales are $10 million, its cost of goods sold is 75% of annual sales, and its average collection period is twice as long as its inventory conversion period. The firm buys on terms of net 30 days, and it pays on time. Its new CFO wants to decrease the cash conversion cycle by 10 days, based on a 365-day year. He believes he can reduce the average inventory to $647,260 with no effect on sales. By how much must the firm also reduce its accounts receivable to meet its goal in the reduction of the cash conversion cycle?
JA Inc. has average inventory of $1,000,000. Its estimated annual sales are $10 million and the firm estimates its receivables conversion period to be twice as long as its inventory conversion period. The firm pays its trade credit on time; its terms are net 30 days. The firm wants to decrease its cash conversion cycle by 10 days. It believes that it can reduce its average inventory to $863,000. Assume a 365-day year and that sales will not change. By how much must the firm also reduce its accounts receivable to meet its goal of a 10-day reduction in its cash conversion cycle?
High Inc. has annual sales of P40,000,000 and keeps average inventory of P10,000,000. On average, the firm has accounts receivable of P8,000,000. The firm buys all raw materials on credit, its trade credit terms are net 30 days, and it pays on time. The firm’s managers are searching for ways to shorten the cash conversion cycle. If sales can be maintained at existing levels but inventory can be lowered by P2,000,000 and accounts receivable lowered by P1,000,000, what will be the net change in the cash conversion cycle (in days)? Use a 360-day year. No rounding-off throughout the process.
XYZ Stadium Inc. has annual sales of P80,000,000 and keeps average inventory of P20,000,000. On average, the firm has accounts receivable of P16 ,000,000. The firm buys all raw materials on credit, its trade credit terms are net 35 days, and it pays on time. The firm’s managers are searching for ways to shorten the cash conversion cycle. If sales can be maintained at existing levels but inventory can be lowered by P4,000,000 and accounts receivable lowered by P2,000,000, what will be the net change in the cash conversion cycle? Use a 365-day year. Round to the closest whole day. A firm has an average age of inventory of 60 days, an average collection period of 45 days, and an average payment period of 30 days. The firm’s cash conversion cycle is A firm has a cash conversion cycle of 120 days, an average collection period of 25 days, and an average payment period of 50 days. The firm’s average age of inventory is A firm purchased raw materials on account and paid for them within…
Tinberg Cans expects sales next year to be $50,000,000. Inventory and accounts receivable (combined) will increase $8,000,000 to accommodate this sales level. The company has a profit margin at 6%. Its dividend payout is 30% of profit. How much external financing will the firm have to seek? Assume there is no increase in liabilities other than that which will occur with the external financing.
Marshall Inc. is looking for ways to shorten its cash conversion cycle. It has annual sales of $36,500,000, or $100,000 a day on a 365-day basis. The firm's cost of goods sold is 75% of sales. On average, the company has $9,000,000 in inventory and $8,000,000 in accounts receivable. Its CFO has proposed new policies that would result in a 20% reduction in inventory conversion period and a 10% in DSO. She also anticipates that the payables deferral period would remain unchanged at 35 days. What will be the company's cash conversion cycle before and after the new policies being implemented? Round to the nearest whole day.
Columbus Corp. has annual sales of $80, 000, 000; its average inventory is $20, 000, 000; and its average accounts receivable is $16,000,000. The firm buys all raw materials on terms of net 35 days payable deferral with $150,000 cost of the good sold per day. The firm is searching for ways to shorten the cash conversion cycle. If inventory conversion can be lowered to 80 days and average collection period can be reduced to 65 days while payable deferral is increased by 5 days, cost of the good sold, and annual sales remain constant, how much is the increase in firm's free cash flow?
Zycad has sales of $110 million a year. If Zycad reduces their processing float by 3 days, what is the increase in the firm's average cash balance? Assume 365 days per year.