Calculate the firm''s total resources invested in its ccc

Assignment Help Finance Basics

Reference no: EM131290043

King Manufacturing turns its inventory 9.1 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 $72 million, its cost of goods sold represents 50 percent of sales, and its purchases represent 80 percent of cost of goods sold. Assume a 365-day year.

a. Calculate the firm's operating cycle (OC) and cash conversion cycle (CCC).

b. Calculate the firm's total resources invested in its CCC.

c. Assuming that the firm pays 14 percent to finance its resource investment in its CCC, how much would it save annually by reducing its CCC by 20 days if this reduction were achieved by shortening the average age of inventory by 10 days, shortening the average collection period by 5 days, and lengthening the average payment period by 5 days?

d. If the 20-day reduction in the firm's CCC could be achieved by a 20-day change in only one of the three components of the CCC, which one would you recommend? Explain.

Reference no: EM131290043

Questions Cloud

Computer operating systems that allows users : Rlogin is a software utility for Unix-like computer operating systems that allows users to log in on another host via a network, communicating via TCP port 513. Rlogin is most commonly deployed on corporate or academic networks, where user accoun..

Configure internet protocol version 6 : Describe the organization of your choosing, for which you will implement a network implementation plan. Provide the steps to configure Internet Protocol version 6 (IPv6) on a Juniper router; provide actual router commands. Define the routing protocol..

Determine the tax consequences to the shareholder : Sunset Corporation, with E & P of $400,000, makes a cash distribution of $120,000 to a shareholder. The shareholder’s basis in the Sunset stock is $50,000. Determine the tax consequences to the shareholder if the distribution is a nonqualified stock ..

The savings institution that he deposits least cash right : Tom wants to have $5000 in his savings account a year later. He finds there are varying interest rates: 4.375% Compounded annually, 4.25%compounded quarterly, and 4.125% compounded continuously. He wishes to select the savings institution that he dep..

Calculate the firm''s total resources invested in its ccc : If the 20-day reduction in the firm's CCC could be achieved by a 20-day change in only one of the three components of the CCC, which one would you recommend? Explain.

What insights does this productivity measure offer : By consulting business periodicals, find an example of a yield typed of productivity measure. Document exactly how the productivity measure is computed and how it is used. What insights does this productivity measure offer? What might be some of its ..

Explain its relationship to computer forensics : 1. Describe e-discovery, and explain its relationship to computer forensics. 2. Discuss the purpose of information technology audits as they relate to the confidentiality, integrity, and availability of information.

Compute the equity method balance in investment : On January 1, 2014, Corgan Company acquired 70 percent of the outstanding voting stock of Smashing, Inc., for a total of $1,435,000 in cash and other consideration. At the acquisition date, Smashing had common stock of $920,000, retained earnings of ..

Build or buy and service-level agreements : Suppose, as a Chief Information Officer (CIO), you were asked to provide the organization with time-entry system for the employees. Examine the options to insource or outsource the system to be developed.

User Account

All Pages