General Accounting Question please answer do fast and calculation step by step 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?

Cash Conversion Cycle (CCC)The Cash Conversion Cycle (CCC) measures the time it takes a firm to…

Answered: Garrett Industries turns over its…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter16: Working Capital Policy And Short-term Financing

Section: Chapter Questions

Problem 13P

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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? $
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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? $
Brandeis, Inc has a 45-day accounts payable period. The firm has expected quarterly sales of $2,400, $2,800, $3,600, and $4,200, respectively, for the next calendar year. The cost of goods sold for a quarter is equal to 70% of the next quarter sales. The firm has a beginning payables balance of $1,200 as of quarter one. What is the amount of the projected cash disbursements for accounts payable for quarter 3 of the next year? Each quarter has 90 days. Multiple Choice $3,900 $2,730 $2,240 $2,870 $3,060
Negus Enterprises has an inventory conversion period of 50 days, an average collection period of 35 days, and payables deferral period of 25 days. Assume that the costs of goods sold are 80% of its sales. a) What is the length of the firm's cash conversion cycle? b) If Negus's annual sales are $4,380,000 and all sales are on credit, what is the firm's investment in accounts receivable? c) How many times per year does Negus Enterprises turn over its inventory?
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.
Limitless Styles has a 45 day accounts payable period. The firm has expected sales of $900, $1,200, $1,900, and $2,600, respectively, by quarter for the next calendar year. The cost of goods sold for a quarter is equal to 70% of the next quarter sales. The firm has a beginning payables balance of $600 as of quarter one. What is the amount of the projected cash disbursements for accounts payable for Quarter 3 of the next year? Assume that a year has 360 days. A)$1,195 B)$1,085 C)$1,575
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…

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