If in addition to achieving industry standards for payables

Assignment Help Financial Management

Reference no: EM13387799

o a. Assuming a constant rate for purchases, production, and sales throughout the year, what are Casa de Diseno existing operating cycle (OC), cash conversion cycle (CCC), and resource investment need?

o b. If Leal can optimize Casa de Diseno’s operations according to industry standards, what will Casa de Diseno’s operating cycle (OC), cash conversion cycle (CCC), and resource investment need to be under these more efficient conditions?

o c. In terms of resource investment requirements, what is the cost of Casa de Diseno operational inefficiency?

o d. (1) If in addition to achieving industry standards for payables and inventory, the firm can reduce the average collection period by offering credit terms of 3/10 net 60, what additional savings in resource investment costs will result from the shortened cash conversion cycle, assuming that the level of sales remain constant?

o d. (2) If the firm’s sales (all on credit) are $40,000,000 and 45% of the customers are expected to take the cash discount, by how much will the firm’s annual revenues be reduced as a result of the discount?

o d. (3) If the firm’s variable cost of the $40,000,000 in sales is 80%, determine the reduction in the average investment in accounts receivable and the annual savings that will result from this reduced investment, assuming that sales remain constant.

o d. (4) If the firm’s bad-debts expenses decline from 2% to 1.5% of sales, what annual savings will result, assuming that sales remain constant?

o d. (5) Use your findings in parts (2) through (4) to assess whether offering the cash discount can be justified financially. Explain why or why not.

o e. On the basis of your analysis in parts a. through d. what recommendations would you offer Teresa Leal?

o f. Review for Teresa Leal the key sources of short-term financing, other than accounts payable, that she may consider to finance Casa de Diseno’s resource investment need calculated in part b. Be sure to mention both unsecured and secured sources.

Reference no: EM13387799

Questions Cloud

You are planning to purchase 100 shares of preferred stock : you are planning to purchase 100 shares of preferred stock and must choose between stock a and stock b. stock a pays an

What is the economic ordering quantityhow many orders will : a what is the economic ordering quantity?b how many orders will be placed during the year?c what will the average

Define the moral point of view and explain why is it : what is the moral point of view and why is it regarded as important? defend or criticize the view that business people

Thompson inc has a 40 dividend payout ratio its : thompson inc. has a 40 dividend payout ratio. its projections for next year include sales of 6 million and a return on

If in addition to achieving industry standards for payables : o a. assuming a constant rate for purchases production and sales throughout the year what are casa de diseno existing

Write the importance of the government as the buyer in : create a 1050- to 1400-word fictitious dialogue that takes place during a segment of lets talk money a fictitious tv

How might the organization use mission and vision : conduct an internet search to find an organization that lists its mission and vision statement on its website. what do

What are the major components of an internal control system : what are the major components of an internal control system? are these components always

Define capital structure and what are the key differences : 1. what is capital structure and what are the key differences between the capital structure of a business vs. the

User Account

All Pages