Need help Garrett Industries turns over its inventory six timeseach year; it has an average collection period of 45days and an average payment period of 30 days. Thefirm's annual sales are $3 million. Assume there is nodifference in the investment per dollar of sales ininventory, receivables, and payables, and assume a365-day year. If the firm shortens the average age ofinventory by 5 days, speeds the collection of accountsreceivable by an average of 10 days and extends theaverage payment period by 10 days, what would bethe firm's cash conversion cycle and resourceinvestment requirement?

To determine Garrett Industries' cash conversion cycle and resource investment requirement, we'll…

Answered: Garrett Industries turns over its…

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter22: Providing And Obtaining Credit

Section: Chapter Questions

Problem 2MC

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A CARDBOARD BOX FACTORY pays its suppliers 40 days after making the purchase and receiving the goods. The average collection period is 45 days, i.e. its customers settle their debt with the company in that time; and the average inventory age is based on the inventory turnover which is 10 times a year. The company spends about $1.23 million in operating cycle investments. With this data we need to calculate: The operating cycle.The cash conversion cycle.The cash turnover.The minimum cash balance.You plan to make modifications to your policies so that you can decrease your PPC by 10 days, and decrease your EPI by 2 times (before converting it to days). Negotiations with your supplier have been unsuccessful and the payment term has been reduced by 10 days. With these data you have to calculate: Re-calculate the Operating Cycle, the SCC, RC and SMC introducing the proposed changes.Calculate the opportunity cost that the changes will cause, if the company's interest rate is 8%.
The Milton Company currently purchases an average of $18,000 per day in raw materials on credit terms of "net 25." The company expects sales to increase substantially next year and anticipates that its raw material purchases will increase to an average of $22,000 per day. Milton feels that it may need to finance part of this sales expansion by stretching accounts payable. Round your answers to the nearest dollar. Assuming that Milton currently waits until the end of the credit period to pay its raw material suppliers, what is its current level of trade credit? $ If Milton stretches its accounts payable an extra 5 days beyond the due date next year, how much additional short-term funds (that is, trade credit) will be generated? $ solution is incorrect
The Milton Company currently purchases an average of $18,000 per day in raw materials on credit terms of "net 25." The company expects sales to increase substantially next year and anticipates that its raw material purchases will increase to an average of $22,000 per day. Milton feels that it may need to finance part of this sales expansion by stretching accounts payable. Round your answers to the nearest dollar. Assuming that Milton currently waits until the end of the credit period to pay its raw material suppliers, what is its current level of trade credit? $ If Milton stretches its accounts payable an extra 5 days beyond the due date next year, how much additional short-term funds (that is, trade credit) will be generated? $
The Milton Company currently purchases an average of $27,000 per day in raw materials on credit terms of "net 40." The company expects sales to increase substantially next year and anticipates that its raw material purchases will increase to an average of $30,000 per day. Milton feels that it may need to finance part of this sales expansion by stretching accounts payable. Round your answers to the nearest dollar. a. Assuming that Milton currently waits until the end of the credit period to pay its raw material suppliers, what is its current level of trade credit? $ b. If Milton stretches its accounts payable an extra 10 days beyond the due date next year, how much additional short-term funds (that is, trade credit) will be generated? $
The Milton Company currently purchases an average of $23,000 per day in raw materials on credit terms of "net 25." The company expects sales to increase substantially next year and anticipates that its raw material purchases will increase to an average of $26,000 per day. Milton feels that it may need to finance part of this sales expansion by stretching accounts payable. Round your answers to the nearest dollar. a. Assuming that Milton currently waits until the end of the credit period to pay its raw material suppliers, what is its current level of trade credit? $ 575,000 b. If Milton stretches its accounts payable an extra 5 days beyond the due date next year, how much additional short- term funds (that is, trade credit) will be generated? $
Berry Manufacturing turns over its inventory 8 times each year, has an Average Payment Period of 35 days and has an Average Collection Period of 60 days. The firm’s annual sales are $3.5 million. Assume there is no difference in the investment per dollar of sales in inventory, receivable, and payables and that there is a 365-day year. A. How much resources must be invested to support its Cash Conversion Cycle? B. If the firm pays 14% for these resources, by how much would it increase its annual profits by favorably changing its Current Cash Conversion Cycle by 20 days.
Hurkin Manufacturing Company pays accounts payable on the tenth day after purchase. The average collection period is 30 days, and the average age of inventory is 40 days. The firm currently has annual sales of about $18 million and purchases of $14 million. The firm is considering a plan that would stretch its accounts payable by 20 days. If the firm pays 12% per year for its resource investment, what annual savings can it realize by this plan? Assume a 360- day year.
Garrett Industries turns over its inventory 6 times each year; it has an average collection period of 45 days and an average payment period of 30 days. The firm’s annual sales are $3 million. Assume there is no difference in the investment per dollar of sales in inventory, receivables, and payables, and assume a 365-day year. Calculate the firm’s cash conversion cycle, its daily cash operating expenditure, and the amount of resources needed to support its cash conversion cycle. Find the firm’s cash conversion cycle and resource investment requirement if it makes the following changes simultaneously. Shortens the average age of inventory by 5 days. Speeds the collection of accounts receivable by an average of 10 days. Extends the average payment period by 10 days. If the firm pays 13% for its resource investment, by how much, if anything, could it increase its annual profit as a result of the changes in part b? If the annual cost of achieving the profit in part c is $35,000, what…
Cainhurst Inc. had sales last year totaling $530,000, and its year-end Accounts Receivable were $62,750. The firm sells on terms that call for customers to pay within 30 days after the purchase, but some customers delay payment beyond this deadline (meaning they pay late). On average, how many days LATE do customers pay? Base your answer on a 365-day year when calculating the DSO.
A company is launching a new sales initiative and expects sales of $446,838 during the first year, and the gross profit margin to be 25%. To prepare for this, they plan to acquire 49 days worth of inventory. Their vendor will allow 48 days to pay its invoices. The company plans to sell only on account to its customers, so sales will be entirely credit based, and the average invoice is expected to take 44 days to collect. What amount of net working capital should be included in the initial investment? Enter your answer as a monetary amount rounded to four decimal places, but without the currency symbol. For example, if your answer is $90.1234, enter 90.1234 Type your answer...
Please make in excel and take screenshots. A Pumpkin Pie Manufacturing Company pays on the tenth day after purchase. The average collection period is 35 days, and the average inventory age is based on inventory turnover of 9 times per year. The company spends about $16 million on operating cycle investments, and is considering a plan that would lengthen its average payable period by 20 days. If the company pays 12% per year on its investment of resources, what annual savings-if any-can it realize with this plan? Assume there is no discount for early payment of accounts payable and a year has 360 days.
Please make in excel and take screenshots. A Pumpkin Pie Manufacturing Company pays on the tenth day after purchase. The average collection period is 35 days, and the average inventory age is based on inventory turnover of 9 times per year. The company spends about $16 million on operating cycle investments, and is considering a plan that would lengthen its average payable period by 20 days. If the company pays 12% per year on its investment of resources, what annual savings-if any-can it realize with this plan? Assume there is no discount for early payment of accounts payable and a year has 360 days. exercise in the image, it is in Spanish, but it is the original one. (to better understand)

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