How does this affect the average age of the inventory

Assignment Help Financial Management

Reference no: EM131558537

Firm Q currently has sales of $5 million (assume that the cost of goods sold is $4 million, or a 20% gross profit margin) and an inventory turnover of 5.0 (i.e., the firm tends to to sell out its inventory five times throughout the year). Because of a new promotion, sales are expected to increase by 10% while maintaining the same average inventory. How does this affect the average age of the inventory (AAI), the operating cycle (OC), and the cash conversion cycle? Support your answers with calculations. If the sales promotion offers customers credit (i.e., increases the accounts receivable), how would this affect your previous answer?

Reference no: EM131558537

Questions Cloud

What is company target debt-equity ratio : The tax rate is 33 percent. What is the company's target debt-equity ratio?

What is difference in annual inflation rates : What is the difference in the annual inflation rates for the United States and Russia over this period?

What is difference in the annual inflation rates : What is the difference in the annual inflation rates for the United States and Russia over this period?

Result from the proposed inventory control system : Determine the annual savings expected to result from the proposed inventory control system.

How does this affect the average age of the inventory : How does this affect the average age of the inventory (AAI), the operating cycle (OC), and the cash conversion cycle?

What is their rate of return or yield on annuity : What is their rate of return or yield on this annuity purchase.

Particular capital structure should be chosen for spin-off : Your firm has decided to spin off Android01 and Processor01 as a separate firm. Which particular capital structure should be chosen for the spin-off?

Calculate the cost of debt-quity and the wacc : The firm decides to raise $30 million by selling equity and debt. Calculate the cost of debt, equity, and the WACC.

Determine the suitability of new and current products : Another one of your responsibilities as CFO is to determine the suitability of new and current products. Your CEO has asked you to evaluate Android01.

User Account

All Pages