Reference no: EM133076133
1. Brothers Breads has the following data. What is the firm's cash conversion cycle?
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Inventory conversion period =
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50 days
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Average collection period =
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17 days
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Payables deferral period =
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25 days
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2. Mark's Manufacturing's average age of accounts receivable is 45 days, the average age of accounts payable is 40 days, and the average age of inventory is 69 days. Assuming a 365-day year, what is the length of its cash conversion cycle?
3. Data on Nathan Enterprises for the most recent year are shown below, along with the days sales outstanding of the firms against which it benchmarks. The firm's new CFO believes that the company could reduce its receivables enough to reduce its DSO to the benchmarks' average. If this were done, by how much would receivables decline? Use a 365-day year.
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Sales
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$110,000
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Accounts receivable
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$16,000
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Days sales outstanding (DSO)
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53.09
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Benchmark days sales outstanding (DSO)
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20.00
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4. Thornton Universal Sales' cost of goods sold (COGS) average $2,000,000 per month, and it keeps inventory equal to 50% of its monthly COGS on hand at all times. Using a 365-day year, what is its inventory conversion period?
5. Shulman Inc. has the following data, in thousands. Assuming a 365-day year, what is the firm's cash conversion cycle?
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Annual sales =
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$45,000
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Annual cost of goods sold =
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$30,000
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Inventory =
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$4,500
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Accounts receivable =
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$1,800
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Accounts payable =
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$2,500
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6. Kiley Corporation had the following data for the most recent year (in millions). The new CFO believes (1) that an improved inventory management system could lower the average inventory by $4,000, (2) that improvements in the credit department could reduce receivables by $2,000, and (3) that the purchasing department could negotiate better credit terms and thereby increase accounts payable by $2,000. Furthermore, she thinks that these changes would not affect either sales or the costs of goods sold. If these changes were made, by how many days would the cash conversion cycle be lowered?
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Original
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Revised
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Annual sales: unchanged
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$110,000
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$110,000
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Cost of goods sold: unchanged
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$80,000
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$80,000
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Average inventory: lowered by $4,000
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$20,000
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$16,000
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Average receivables: lowered by $2,000
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$16,000
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$14,000
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Average payables: increased by $2,000
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$10,000
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$12,000
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Days in year
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365
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365
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7. Newsome Inc. buys on terms of 3/15, net 45. It does not take the discount, and it generally pays after 60 days. What is the nominal annual percentage cost of its non-free trade credit, based on a 365-day year?
8. Howes Inc. purchases $4,562,500 in goods per year from its sole supplier on terms of 2/15, net 50. If the firm chooses to pay on time but does not take the discount, what is the effective annual percentage cost of its non-free trade credit? (Assume a 365-day year.)