Cash conversion cycle = (Inventory Days + Accounts Receivable Days – Accounts Payable Days). Which of the following would decrease a firm’s cash conversion cycle? Increase the accounts payable days Increase the inventory days Increase the accounts receivable days Increase the cash days
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Question 9
Cash conversion cycle = (Inventory Days + Accounts Receivable Days – Accounts Payable Days). Which of the following would decrease a firm’s cash conversion cycle?
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Increase the accounts payable days |
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Increase the inventory days |
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Increase the accounts receivable days |
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Increase the cash days |
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- Whaley & Whaley has the following data. What is the firm's cash conversion cycle? Inventory conversion period = Average collection period = Payables deferral period = O a. 37 days O b. 31 days O c. 41 days Od: 45 days O e. 34 days 41 days 31 days 38 daysPoint out one of the following that will increase the operating cash cycle?A Increase in inventory daysB Decrease in trade receivable daysC Increase in trade payable daysD Decrease in inventory dayWhich of the following will shorten the cash cycle? Select one: A. An increase in the raw materials inventory holding period B. An increase in the production period C. An increase in the trade receivables days D. An increase in the trade payables days
- What is Days Sales Outstanding ( DSO ) a) Number of days in the Cash Conversion Cycleb) Number of days sales that the trade receivables are equal toc) Number of days sales that the trade payables are equal tod) Number of days till maturityQUESTION 7 Which of the following statements is true? O A. Profit margin is calculated by dividing total assets by sales. OB. Return on Equity rises if equity increases and net income remain constant. OCA 10% increase in cash will lead to a greater Cash Ratio O D. The current ratio increases if the current liabilities increase QUESTION 8 Which of the following statements is false? A. A positive cash conversion cycle means the company is payıng its payables before receiving its recervables. O B. A negative cash conversion cycle means the company is collecting its recervable before payıng its payables. OC The cash conversion cycle is the length of time required for the company to recieve its inventory and then recerve cash from the sales of its inventory. O D.All of the above statements are true.Cash conversion cycle a. is longer if you decrease the level of your inventories. b. is longer if you increase the volume of your payables. c. is calculated in percentage. d. is shorter if customers are paying by cash (ceteris paribus).
- Define the following terms: inventory conversion period, average collection period, and payables deferral period. Explain how these terms are used to form the cash conversion cycle. How would a reduction in the cash conversion cycle increase profitability? What are some actions a firm can take to shorten its cash conversion cycle? V.Which of the following increases the cash conversion cycle? A.A decrease in inventory turnover B.An increase in the cash discount C.An increase in accounts payable D.A decrease in inventory leveln.com Connect (i) Consider the following cash flows: Year Cash Flow 0 -$29,600 1 14,100 2 14,800 3 11,200 a. What is the profitability index for the cash flows if the relevant discount rate is 11 percent? Note: Do not round intermediate calculations and round your answer to 3 decimal places, e.g., 32.161 b. What is the profitability index if the discount rate is 16 percent? Note: Do not round intermediate calculations and round your answer to 3 decimal places, e.g., 32.161. c. What is the profitability index if the discount rate is 23 percent? Note: Do not round intermediate calculations and round your answer to 3 decimal places, e.g., 32.161. a. Profitability index b. Profitability index c. Profitability index.
- What is the cash conversion cycle (CCC)? Whyis it better, other things held constant, to have a shorter rather than a longer CCC? Suppose youknow a company’s annual sales, average inventories, average accounts receivable, average accountspayable, and annual cost of goods sold. How couldyou use that information to determine the company’s CCC? If you also knew its cost of capital, howcould you determine its annual cost of carryingworking capital? How could you determine howmuch the company would save if it could reducethe CCC by, say, 5 days? What are some actions itmight take to reduce the CCC?Consider the following cash flows: Year Cash Flow 0 $32,500 123 13,300 18,400 10,700 What is the IRR of the cash flows? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Internal rate of return %Consider the following cash flows: Year Cash Flow 0 −$28,300 1 15,400 2 13,500 3 9,900 a. What is the profitability index for the cash flows if the relevant discount rate is 9 percent? (Do not round intermediate calculations and round your answer to 3 decimal places, e.g., 32.161.) b. What is the profitability index if the discount rate is 14 percent? (Do not round intermediate calculations and round your answer to 3 decimal places, e.g., 32.161.) c. What is the profitability index if the discount rate is 25 percent? (Do not round intermediate calculations and round your answer to 3 decimal places, e.g., 32.161.)