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CASH MANAGEMENT 1. Raviolli Enterprise has an average age of accounts receivable is 45 days. The average age of accounts payable is 40 days and the average age of inventory is 69 days. Assuming a 365-day year, what is the length of its cash conversion cycle?

CASH MANAGEMENT 1. Raviolli Enterprise has an average age of accounts receivable is 45 days. The average age of accounts payable is 40 days and the average age of inventory is 69 days. Assuming a 365-day year, what is the length of its cash conversion cycle?

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Please answer questions 1, 2, and 3 with complete solutions that are original not copy-paste. Thank you so much. 

CASH MANAGEMENT 1. Raviolli Enterprise has an average age of accounts receivable is 45 days. The average age of accounts payable is 40 days and the average age of inventory is 69 days. Assuming a 365-day year, what is the length of its cash conversion cycle? 2. Tortellini Inc. payables policy is being revised. It has an annual overall sales of P50,735,000, an inventory level of P15,012,000, and an accounts receivable of P10,008,000. The cost of goods sold for the company is 85 percent of sales. All transactions are made on credit, and payments are always made on the 30th day. However, it now intends to fully use trade credit and pay its suppliers on the 40th day. The CFO also assumes that sales can be sustained at the current pace, but inventory and accounts receivable can be reduced by P1,946,000 and P1,946,000, respectively. What would be the net change in the cash conversion cycle if the year is 365 days long? 3. Linguine Resto is planning its cash budget. It anticipates P30,000 in sales in January, P35,000 in February, and P35,000 in March. What are the estimated cash receipts for March, if 20 percent of sales are cash, 40 percent are credit sales paid in the month after the sale, and 40 percent are credit sales paid 2 months after the sale?
Transcribed Image Text:CASH MANAGEMENT 1. Raviolli Enterprise has an average age of accounts receivable is 45 days. The average age of accounts payable is 40 days and the average age of inventory is 69 days. Assuming a 365-day year, what is the length of its cash conversion cycle? 2. Tortellini Inc. payables policy is being revised. It has an annual overall sales of P50,735,000, an inventory level of P15,012,000, and an accounts receivable of P10,008,000. The cost of goods sold for the company is 85 percent of sales. All transactions are made on credit, and payments are always made on the 30th day. However, it now intends to fully use trade credit and pay its suppliers on the 40th day. The CFO also assumes that sales can be sustained at the current pace, but inventory and accounts receivable can be reduced by P1,946,000 and P1,946,000, respectively. What would be the net change in the cash conversion cycle if the year is 365 days long? 3. Linguine Resto is planning its cash budget. It anticipates P30,000 in sales in January, P35,000 in February, and P35,000 in March. What are the estimated cash receipts for March, if 20 percent of sales are cash, 40 percent are credit sales paid in the month after the sale, and 40 percent are credit sales paid 2 months after the sale?
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