Soenen Inc. had the following data for 2012 (in millions). The new CFO believes that the company could improve its working capital management sufficiently to bring its net working capital and cash conversion cycle up to the benchmark companies' level without affecting either sales or the costs of goods sold. Soenen finances its net working capital with a bank loan at an 8% annual interest rate, and it uses a 365-day year. If these changes had been made, by how much would the firm's pre-tax income have increased? Original Data Related CCC Benchmarks' CCC Sales $108,000 Cost of goods sold $80,000 Inventory (ICP) $20,000 91.25 38.00 Receivables (DSO) $16,000 54.07 20.00 Payables (PDP) $5,000 22.81 30.00 122.51 28.00

Soenen Inc. had the following data for 2012 (in millions). The new CFO believes that the company could improve its working capital management sufficiently to bring its net working capital and cash conversion cycle up to the benchmark companies' level without affecting either sales or the costs of goods sold. Soenen finances its net working capital with a bank loan at an 8% annual interest rate, and it uses a 365-day year. If these changes had been made, by how much would the firm's pre-tax income have increased? Original Data Related CCC Benchmarks' CCC Sales $108,000 Cost of goods sold $80,000 Inventory (ICP) $20,000 91.25 38.00 Receivables (DSO) $16,000 54.07 20.00 Payables (PDP) $5,000 22.81 30.00 122.51 28.00

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter3: Evaluation Of Financial Performance

Section: Chapter Questions

Problem 7P

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Manalo Inc. had the following data for 2019 (in millions). The new CFO believes that the company could improve its working capital management sufficiently to bring its NWC and CCC up to the benchmark companies' level without affecting either sales or the costs of goods sold. Manalo finances its net working capital with a bank loan at an 8% annual interest rate, and it uses a 365-day year. If these changes had been made, by how much would the firm's pre-tax income have increased?
Manalo Inc. had the following data for 2019 (in millions). The new CFO believes that the company could improve its working capital management sufficiently to bring its NWC and CCC up to the benchmark companies' level without affecting either sales or the costs of goods sold. Manalo finances its net working capital with a bank loan at an 8% annual interest rate, and it uses a 365-day year. If these changes had been made, by how much would the firm's pre-tax income have increased? Original Benchmark Data Related CCC CCC Sales Cost of goods sold Inventory (iCP) Receivables (DSO) P100,000 PS0,000 P20,000 P16,000 P5,000 91.25 38.00 S8.40 20.00 20.00 28.00 Payables (POP) 22.1 12634 2,531 2,301 O 1,901 2,092 2,784
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Strickler Technology is considering changes in its working capital policies to improve its cash flow cycle. Strickler’s sales last year were $3,250,000 (all on credit), and its net profit margin was 7%. Its inventory turnover was 6.0 times during the year, and its DSO was 41 days. Its annual cost of goods sold was $1,800,000. The firm had fixed assets totaling $535,000. Strickler’s payables deferral period is 45 days. a. Calculate Strickler’s cash conversion cycle. b. Assuming Strickler holds negligible amounts of cash and marketable securities, calculate its total assets turnover and ROA. c. Suppose Strickler’s managers believe the annual inventory turnover can be raised to 9 times without affecting sales. What would Strickler’s cash conversion cycle, total assets turnover, and ROA have been if the inventory turnover had been 9 for the year?
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A company is deciding whether to launch a new product or not. The research and development cost incurred by the company for this new product is RO.30,000. The research suggests that the revenue of the company will increase by RO.25,000 per year for next 5 years. However, the new product will have additional operating expenses of RO.9,000 per year as well. If the corporation tax rate is 12%, what will be the net relevant cash flows for the first year of operations, if the product is launched? a. RO.(8,000) Negative b. None of the option c. RO.14,080 d. RO.15,080
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	Original
	Data	Related CCC	Benchmarks' CCC
Sales	$108,000
Cost of goods sold	$80,000
Inventory (ICP)	$20,000	91.25	38.00
Receivables (DSO)	$16,000	54.07	20.00
Payables (PDP)	$5,000	22.81	30.00
		122.51	28.00