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Define operating cycle and long and short operating cycle?
Use of operating cycle?
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Q. Problems in assigning weights? Problems in assigning weights: for determining the weighted average costs of capital, weight has to assign to the specific cost of the individ
Long-Term Solvency Ratios (Financial Leverage Ratios) Debt-Equity Ratio = Total Debt / Total Equity à It is a measure of a company's debt utilization. It gives the ex
how is financial management relevant to profit and loss?
Working capital cycle (operating/trading/cash cycle) It is the time between paying for goods supplied and final receipt of cash from their sale. It is desirable to keep cycle a
Roxanne invested $560,000 in a new business 7 years ago. The business was expected to bring in $8,000 each month for the next 26 years (in excess of all costs). The annual cost of
There is some discussion on whether Multinational Corporations (MNC's) enhance risk when borrowing foreign currencies. Those in favor of borrowing state that lower costs of financi
How does accounts receivable factoring work? What are the benefits to the two parties involved? What are the risks? Factoring is when one firm trade accounts receivable (AR)
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Lee Sun's has sales of $6,000, total assets of $5,000, and a profit margin of 10 percent. The firm has a total debt ratio of 40 percent. What is the return on equity?
The Managing Director of your firm is thinking aloud about an appropriate gearing level for the company: "The consultants I spoke to yesterday explained that some theorists adva
Definition of Operating Cycle: The operating cycle is the amount of time it takes for a company to turn cash used to buy inventory into cash once again. This number is evaluated by adding the age of inventory (the number of days that inventory is held prior to sale) with the collection period (the number of days needed to collect receivables). A company with a short operating cycle is able to quickly recover its investment. A corporation with a long operating cycle will have less cash available to meet any short-term requirements, which can result in increased borrowing and interest expense.
Definition of Operating Cycle:
The operating cycle is the amount of time it takes for a company to turn cash used to buy inventory into cash once again. This number is evaluated by adding the age of inventory (the number of days that inventory is held prior to sale) with the collection period (the number of days needed to collect receivables). A company with a short operating cycle is able to quickly recover its investment. A corporation with a long operating cycle will have less cash available to meet any short-term requirements, which can result in increased borrowing and interest expense.
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