ABC Corporation has 9million in inventory and 8m in accounts receivable. A 20% reduction in inventories and accounts receivable is proposed. Sales would reduce by 10%, while the payables deferral period would remain at 35 days. A company has annual sales of 3.65m. The CGS is 75% of sales. Find the effect of the changes on the cash conversion cycle?

ABC Corporation has 9million in inventory and 8m in accounts receivable. A 20% reduction in inventories and accounts receivable is proposed. Sales would reduce by 10%, while the payables deferral period would remain at 35 days. A company has annual sales of 3.65m. The CGS is 75% of sales. Find the effect of the changes on the cash conversion cycle?

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter17: The Management Of Cash And Marketable Securities

Section: Chapter Questions

Problem 1P

See similar textbooks

Similar questions

mekmek Corporation uses the Baumol Cash Model to determine its optimal cash balance. For the coming year, the expected cash disbursement total to P432,000. The interest rate on marketable securities is P8 per transaction. Using 5% carrying cost rate, what is the optimal cash balance of the company? A. 1,175.76 B. 5,878.78 C. 11,757.55 D. 142,000
The net present value (NPV) the cash flows from T=0 to T=3 is $2278 when using a 10% discount rate. The missing cash flow from year 2 is closest to ________. T0=-28,000 T1=10,000 T2=??? T3=15,000.
Please answer the questions What would be the net change in the cash conversion cycle if the year is 365 days long? Answer it with complete solutions and explanations if needed. Thank you
A company is planning to expand its business is costing OMR 19252. The following cash inflows are expected. Calculate Profitability index given the rate of discounting to be 3.008% Years Machine A 12396 13300 12500 4 14500 2. 3.
XYZ have estimated free cash flows of P2,200,000 on year 5 and assumes that the company’s cash flow will grow by 3% per year. Using discount rate of 11%, what is the terminal value?
A company is planning to expand its business is costing OMR 23355. The following cash inflows are expected. Calculate Profitability index given the rate of discounting to be 3.008% Years Machine A 1 10548 2 13300 3 12500 4 14500 a. none of the options b. 23735.221 c. 0.496 d. 2.016 e. 2.029
a) What is the optimal transaction size? b) What should be Rosal's average cash balance? c) What is the total cost?
National Co. would like to maintain its cash account at a minimum level of P25,000, but expect the standard deviation in net daily cash flows to be P2,000; the effective annual rate on marketable securities to be 7.5% per year, and the trading cost per sale or purchase of marketable securities to be P200 per transaction. What will be their optimal cash return point?
2. In the working capital management, we know about cash conversion cycle model. For problem if average inventories are $3 million and sales are $11 million. If receivables are $ 657.535 and sales are $ 11 million. Then, if its cost of goods sold are $9 million per year and if its accounts payable average S 657.535. What is the length of the cash conversion cicle?
Your income is $80,000 a year. Bonds earn 6.5% interest. Converting from bonds to cash costs $25 per transaction. Given the assumptions of the inventory model, what is the optimum number of cash conversions per year? [Express your number rounded off to one decimal place.] 7. Extending from #6, what is your money demand? 8. Extending from #6, but where budget cuts have squashed your income down to $50,000 per year and the cost of bond conversion has risen to $50 per transaction. Now what is the optimal number of conversions per year? [Express your number rounded off to one decimal place.]
Rosanna Corp. has P15million of sales; P2million of inventories; P3million of receivables and P1million of payable. Its cost of sales is 80% of sales, and it finance working capital with bank loans at an 8% rate. What is Rosanna’s cash conversion cycle? If Rosanna could lower its inventories and receivables by 10% each, and increase its payable by 10%, all without affecting sales or cost of sales, what would be the new Cash conversion cycle? Following number 2 above, how much cash would be freed up?
If the discounted Free Cash Flows for a company after two years of operating = $3500 . and the required rate of return = 10% Then the undiscounted cash flows would be :- Select one: a. 3181 b. 4235 C. 4658 d. 2629