Log in
Finance
1
answer
0
watching
537
views

Garrett Industries turns over its inventory 7 times each year; it has an average collection period of 36 days, and an average payment period of 31 days. The firm's annual sales are $3.1 million. Assume there is no difference in the investment per dollar of sales in inventory, receivables, and payables; and assume a 365- day year

A. Calculate the firm's cash conversion cycle, its daily cash operating expenditure, and the amount of resources needed to support its cash conversion cycle.

B. Find the firm's cash conversion cycle and resource investment requirement if it makes the following changes simultaneously
1. shortens the average age of inventory by 6 days
2. speeds the collection of accounts receivables by an average of 8 days.
3. Extends the average payment period by 8 days.

C. If the firm pays 9% for its resource investment, by how much, if anything, could it increase its annual profit as a result of the changes in part b?

D. If the annual cost of achieving the profit in part c is $34,000, what action would you recommend to the firm? why?

Watch
1
answer
0
watching
537
views

For unlimited access to Homework Help, a Homework+ subscription is required.

Sixta Kovacek
Sixta KovacekLv2
28 Sep 2019

Unlock all answers

Get 1 free homework help answer.
Already have an account? Log in
Share

Related questions

Camp Manufacturing turns over its inventory five times each year, has an average payment period of 35 days, and has an average collection period of 60 days. The firm has annual sales of $3.5 million and cost of goods sold of $2.4 million.

Calculate the firms operating cycle and cash conversion cycle.

What is the dollar value of inventory held by the firm?

If the firm could reduce the average age of its inventory from 73 days to 63 days, by how much would it reduce its dollar investment in working capital?

Camp manufacturing turns over its inventory 5 times each year, has an average payment period of 35 days, and has an average collection period of 60 days. The firm has annual sales of $3.5 million and cost of goods sold of $2.4 million. (Use 365-day year).

a. Calculate the firm’s operating cycle and cash conversion cycle.

b. What is the dollar value of inventory held by the firm?

c. If the firm could reduce the average age of inventory from 73 days to 63 days, by how much would it reduce its dollar investment in working capital?

6. Gator Corporation currently has a current ratio equal to 0.65. If Gator Corporation increases current assets and current liabilities by the same amount, what will happen to their current ratio? a. Increase b. Decrease c. Stay the same d. Change, but more information is required to determine the direction of the change. e. None of the above. 7. On average, a firm sells $2,500,000 in merchandise a month. Its cost of goods sold equals 80 percent of sales, and it keeps inventory equal to one-half of its monthly cost of goods on hand at all times. If the firm analyzes its accounts using a 360-day year, what is the firm's inventory conversion period? a. 360 days b. 180 days c. 30 days d. 15 days e. 10 days 8. You have recently been hired to improve the performance of Multiplex Corporation which has been experiencing a severe cash shortage. As one part of your analysis, you want to determine the firm's cash conversion cycle. Using the following information and a 360-day year, what is your estimate of the firm's current cash conversion cycle? Current inventory = $120,000 Annual sales = $600,000 Accounts receivable = $160,000 Accounts payable = $25,000 Total annual purchases = $360,000 Purchases credit terms: net 30 days Receivables credit terms: net 50 days a. 49 days b. 143 days c. 100 days d. 168 days e. 191 days 9. Jordan Air Inc. has average inventory of $1,000,000. Its estimated annual sales are 15 million and the firm estimates its receivables collection period to be twice as long as its inventory conversion period. The firm pays its trade credit on time; its terms are net 30. The firm wants to decrease its cash conversion cycle by 10 days. It believes that it can reduce its average inventory to $900,000. Assume a 360-day year and that sales will not change. Cost of goods sold equal 80 percent of sales. By how much must the firm also reduce its accounts receivable to meet its goal of a 10-day reduction? a. $101,900 b. $1,000,000 c. $291,667 d. $333,520 e. $0

Weekly leaderboard

Home
Homework Help 3,900,000
Finance 370,000
Start filling in the gaps now
Log in