Don't use ai given answer accounting questions A firm is considering several policy changes to increase sales. It willincrease the variety of gods it keeps in inventory, but this will increaseinventory by $25,000. It will offer more liberal sales terms, but this willresult in average receivables increasing to $80,000. These actions areexpected to increase sales to $950,000 per year, and cost of goodswill remain at 70% of sales. Because of the firm's increased purchasesfor its own production needs, average payables will increase to$50,000. What effect will these changes have on the firm's cashconversion cycle? (use 365 days in year)

Step 1: Define Cash Conversion CycleThe cash conversion cycle measures the duration required by any…

Answered: A firm is considering several policy…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter18: The Management Of Accounts Receivable And Inventories

Section: Chapter Questions

Problem 12P

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A firm is considering several policy changes to increase sales. It will increase the variety of goods it keeps in inventory, but this will increase inventory by $12,000. It will offer more liberal sales terms, but this will result in average receivables increasing by $69,000. These actions are expected to increase sales by $820,000 per year, and cost of goods will remain at 80% of sales. Because of the firm’s increased purchases for its own production needs, average payables will increase by $37,000. What effect will these changes have on the firm’s cash cycle? (Use 365 days in a year. Do not round your intermediate calculations. Round your answer to 2 decimal places.) Change in cash cycle days
A firm is considering several policy changes to increase sales. It will increase the variety of goods it keeps in inventory, but this will increase inventory by $11,500. It will offer more liberal sales terms, but this will result in average receivables increasing by $68,000. These actions are expected to increase sales by $815,000 per year, and cost of goods will remain at 70% of sales. Because of the firm’s increased purchases for its own production needs, average payables will increase by $36,500. What effect will these changes have on the firm’s cash cycle? (Use 365 days in a year. Do not round your intermediate calculations. Round your answer to 2 decimal places.) What is the change in cash cycle? Answer in Excel and show formulas please.
Need answer this accounting question step by step calculation and do fast
To increase Sales and Sales Growth, the top Marketing Manager suggested to price products slightly lower than the main competitor and at the same time increase product quality (competitor is not expected to react or make changes). This strategy would require an initial one time investment today of $1 million in advertising (and for some machines) and the Net Profit Margin (and Cash Flows) will be zero for years 1, 2, 3. However, sales are expected to grow 20% in years 1,2,3 (then sales will stabilize and sales growth will be 1% in year 4 and over). Also, in year 4 Net Profit Margin will return to 5% (due to economies of scale). (Some numbers have been pre-filled in the tables below). CURRENT BUSINESS SITUATION END OF YEAR 0 1 … Sales Growth 0% … Net Profit Margin 5% … Sales ($Millions) 80.00 … Profit or Cash Flow 4.00 … NPV(i=.15) 26.67 $Millions SUGGESTED SALES…
Abercrombie & Fitch, once the favorite of loyal teens, is considering lowering prices on all items it sells in an effort to win them back after several years of sales declines. A&F’s total sales were $4 billion last year, but they have been declining in the face of a weak economy and an intensively competitive retail environment. Price reductions are often effective in increasing sales, but marketers need to analyze how much sales must go up before a price reduction pays off and increases revenue enough to make the it worth doing. By what percentage must costs decrease if A&F wants to maintain the gross margin percentage of 60 percent?
Abercrombie & Fitch, once the favorite of loyal teens, is considering lowering prices on all items it sells in an effort to win them back after several years of sales declines. A&F’s total sales were $4 billion last year, but they have been declining in the face of a weak economy and an intensively competitive retail environment. Price reductions are often effective in increasing sales, but marketers need to analyze how much sales must go up before a price reduction pays off and increases revenue enough to make the it worth doing. Assuming A&F’s gross profit margin is 60 percent and cost of goods sold represents the only variable cost, by how much must sales increase to maintain the same gross profit margin in terms of absolute dollars if A&F lowers prices by 10 percent?
Abercrombie & Fitch, once the favorite of loyal teens, is considering lowering prices on all items it sells in an effort to win them back after several years of sales declines. A&F's total sales were $3 billion last year but they have been declining in the face of a weak economy and an intensively competitive retail environment. Price reductions are often effective in increasing sales, but marketers need to analyze how much sales must go up before a price reduction pays off and increases revenue enough to make the it worth doing. Assuming A&F's gross profit margin is 55 percent and cost of goods sold represents the only variable cost, by how much sales increase to maintain the same gross profit margin in terms of absolute dollars it A&F lowers prices by 10 percent? The current gross profit is $ 1. 65 billion (Round to two decimal places.) Set the initial price equal to $1 00 Then the new price is $9 (Round to the nearest cent) The new gross margin percentage in decimal form equals 55…
A company with annual sales of $22,000,000 is considering changing its payment terms from net 40 to net 30 to encourage customers to pay more promptly. The company forecasts that customers would respond by paying on day 32 rather than day 44 as at present (assume a 360 day year) but would decrease their purchases by $400,000 per year. The company also forecasts that its idle cash balance would decrease by $80,000 and administrative costs would be reduced by $30,000 per year. The company's variable costs average 62% of sales, it is in the 35% marginal tax bracket, and it has an 8% cost of capital. Part A: Calculate the incremental cash flows from accepting this proposal, and organize your cash flows into a cash flow spreadsheet. Part B: Calculate the proposal's NPV, IRR, and NAB. Part C: Should the company shorten its payment terms?
A company with annual sales of $22,000,000 is considering changing its payment terms from net 40 to net 30 to encourage customers to pay more promptly. The company forecasts that customers would respond by paying on day 32 rather than day 44 as at present (assume a 360 day year) but would decrease their purchases by $400,000 per year. The company also forecasts that its idle cash balance would decrease by $80,000 and administrative costs would be reduced by $30,000 per year. The company's variable costs average 62% of sales, it is in the 35% marginal tax bracket, and it has an 8% cost of capital. Part A: Calculate the incremental cash flows from accepting this proposal, and organize your cash flows from part A into a cash flow spreadsheet. Part B: Calculate the proposal's NPV, IRR, and NAB. Part C: Should the company shorten its payment terms?
Johnson Electronics is considering extending trade credit to some customers previously considered poor risks. Sales would increase by $270,000 if credit is extended to these new customers. Of the new accounts receivable generated, 9 percent will prove to be uncollectible. Additional collection costs will be 6 percent of sales, and production and selling costs will be 75 percent of sales. 1. Compute the incremental income before taxes. 2. What will the firm’s incremental return on sales be if these new credit customers are accepted? (Round final answer to 2 decimals) 3. If the receivable turnover ratio is 5 to 1, and no other asset buildup is needed to serve the new customers, what will Johnson Electronics’ incremental return on new average investment be? (Round only the final answer to %)
If the Rhine Company ignores the possibility that other firms may enter its market, it should set a price of $10,000 for its product, which is a power tool. But if it does so, other firms will begin to enter the market. During the next two years it will earn $4 million per year, but in the following two years it will earn $1 million per year. On the other hand, if it sets a price of $7,000, it will earn $2.5 million in each of the next four years because no entrants will appear. Try various discount (interest) rates and draw a conclusion about the timing of profits
If the Rhine Company ignores the possibility that other firms may enter its market, it should set a price of $10,000 for its product, which is a power tool. But if it does so, other firms will begin to enter the market. During the next two years it will earn $4 million per year, but in the following two years it will earn $1 million per year. On the other hand, if it sets a price of $7,000, it will earn $2.5 million in each of the next four years because no entrants will appear. If the interest rate is 10 percent, should the Rhine Company set a price of $7,000 or $10,000? a. NPV $8.4M for $10,000 price b. NPV $10.0M for $10,000 price c. NPV $7.9M for $7,000 price d. NPV $10.0M for $7,000 price

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