3. Everest Pasmina Factory turns its inventory 8 times each year, has average payment period of 3 days, and collection period of 60 days. Firm's total outlays in operating cycle investments are Rs 3.3 millions. Assume 360 days a year. a. Calculate firm's operating and cash conversion cycle. b. Calculate the firm's cash operating expenditures. How uch negotiated financing is required to finance the cash conversion cycle? c. Assuming that firm pays 16 % interest on its financing, what might be the increase in annual profit if it can reduce its current cash conversion cycle by 20 days? 105,70; 9722, 680540; 27221.6
3. Everest Pasmina Factory turns its inventory 8 times each year, has average payment period of 3 days, and collection period of 60 days. Firm's total outlays in operating cycle investments are Rs 3.3 millions. Assume 360 days a year. a. Calculate firm's operating and cash conversion cycle. b. Calculate the firm's cash operating expenditures. How uch negotiated financing is required to finance the cash conversion cycle? c. Assuming that firm pays 16 % interest on its financing, what might be the increase in annual profit if it can reduce its current cash conversion cycle by 20 days? 105,70; 9722, 680540; 27221.6
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Ee 473.
Transcribed Image Text:3. Everest Pasmina Factory turns its inventory 8 times each year, has average payment period of 30
days, and collection period of 60 days. Firm's total outlays in operating cycle investments are Rs
3.3 millions. Assume 360 days a year.
a. Calculate firm's operating and cash conversion cycle.
b. Calculate the firm's cash operating expenditures. How uch negotiated financing is required
to finance the cash conversion cycle?
c. Assuming that firm pays 16% interest on its financing, what might be the increase in annual
profit if it can reduce its current cash conversion cycle by 20 days?
105,70; 9722, 680540; 27221.6
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