51166 Lecture Notes - Lecture 2: Accrual, Current Liability, Bridge Loan

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maroonporcupine490

20 Jan 2017

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Characteristics of different types of loans (2). mmap - 4/16/2013 - mindjet. For most firms, net working capital is positive, indicating that some current assets are not financed with current liabilities. How long the firm must finance operating cash, inventory and accounts receivables from the day of first sale. How long a firm obtains interest-free financing from suppliers in the form of accounts payable and accrued expenses to help finance the asset cycle. The minimum level of current assets minus the minimum level of adjusted current liabilities. Current liabilities net of short-term bank credit and current maturities of long-term debt. Difference in total current assets and adjusted current liabilities. Not legally binding but represent a promise that the lender will advance credit. Legally binding even though no written agreement is signed. A commitment fee is charged for making credit available, regardless of whether the customer actually uses the line. The security consists of paper assets that presumably represent sales.

Related Questions

The financial statements of Homefront, Inc. are presented in the tables below.

Based on the information in the tables, and using a 365-day calendar, calculate the firm's cash conversion cycle.

Round the answer to two decimal places.

Balance Sheet, December 31, 2015

Assets		Liabilities and Equity
Cash and marketable securities	$109,287	Accounts payable	$224377
Accounts receivable	$391,635	Notes payable	$98985
Inventories	$599,352	Accrued expenses	$76422
Prepaid expenses	$10121	Total current liabilities	$399784
Total current assets	$1110395	Long-term debt	$240870
Gross fixed assets	$1906628	Par value and paid-in-capital	$257990
Less: accumulated depreciation	$463943	Retained earnings	$1654436
Net fixed assets	$1442685	Common equity	$1912426
Total assets	$2553080	Total liabilities and owner's equity	$2553080

Income Statement, 2015

Net sales (all credit)	$3404431
Less: cost of goods sold	$2723545
Selling and administrative expense	$344711
Depreciation expense	$107754
EBIT (operating profit)	$228421
Interest expense	$24358
Earnings before taxes	$204063
Income taxes	$69381
Net income	$134682

Cash conversion cycle:

greyswan940

Problem 3-13 Comprehensive Ratio Analysis Data for Lozano Chip Company and its industry averages follow. Lozano Chip Company: Balance Sheet as of December 31, 2013 (Thousands of Dollars) Cash $ 225,000 Accounts payable $601,866 Receivables 1,575,000 Notes payable 326,634 Inventories 1,125,000 Other current liabilities 525,000 Total current assets $2,925,000 Total current liabilities $1,453,500 Net fixed assets 1,350,000 Long-term debt 1,068,750 Common equity 1,752,750 Total assets $4,275,000 Total liabilities and equity $4,275,000 Lozano Chip Company: Income Statement for Year Ended December 31, 2013 (Thousands of Dollars) Sales $7,500,000 Cost of goods sold 6,375,000 Selling general and administrative expenses 825,000 Earnings before interest and taxes (EBIT) $ 300,000 Interest expense 111,631 Earnings before taxes (EBT) $ 188,369 Federal and state income taxes (40%) 75,348 Net income $ 113,022 Calculate the indicated ratios for Lozano. Round your answers to two decimal places. Ratio Lozano Industry Average Current assets/Current liabilities 2.0 Days sales outstanding* days 35.0 days COGS/Inventory 6.7 Sales/Fixed assets 12.1 Sales/Total assets 3.0 Net income/Sales % 1.2% Net income/Total assets % 3.6% Net income/Common equity % 9.0% Total debt/Total assets % 30.0% Total liabilities/Total assets % 60.0% *Calculation is based on a 365-day year. Construct the extended Du Pont equation for both Lozano and the industry. Round your answers to two decimal places. For the firm, ROE is % For the industry, ROE is % Outline Lozano's strengths and weaknesses as revealed by your analysis

silverpanda299

The Greek Connection had sales of $32 million in 2009, and a cost of goods sold of $20 million. A simplified balance sheet for the firm appears below:

	THE GREEK CONNECTION
	Balance Sheet
	As of December 31, 2009
	(000)

	Assets		Liabilities and Equity
	Cash	$2,000	Accounts payable	$1,500
	Accounts receivable	3,950	Notes payable	1,000
	Inventory	1,300	Accruals	1,220
	Total current assets	$7,250	Total current liabilities	$3,720

	Net plant, property		Long-term debt	$3,000
	and equipment	$8,500	Total liabilities	$6,720
	Total Assets	$15,750	Common equity	9,030
			Total liabilities and equity	$15,750

a.	Calculate The Greek Connectionâs net working capital in 2009.
b.	Calculate the cash conversion cycle of The Greek Connection in 2009.
c.	The industry average days sales outstanding ratio is 30 days. What would the cash conversion cycle for The Greek Connection have been in 2009 had it matched the industry average days sales outstanding?

	Sales (000)	$32,000	Days in a year	365
	Cost of Goods Sold (000)	$20,000

a.	Calculate The Greek Connectionâs net working capital in 2009.

	Net working capital (000)

b.	Calculate the cash conversion cycle of The Greek Connection in 2009.

	Accounts receivable days
	Inventory days
	Accounts payable days
	Cash conversion cycle (days)

c.	The industry average days sales outstanding ratio is 30 days. What would the cash conversion cycle for The Greek Connection have been in 2009 had it matched the industry average days sales outstanding?

	Industry accounts receivable days	30

	Cash conversion cycle (days)

rosetiger825

51166 Lecture Notes - Lecture 2: Accrual, Current Liability, Bridge Loan

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