Granada Inc. considers the following: i) a developed inventory management system could lower the average inventory by $4,000 ii) improvements in the credit department could reduce account receivables by $2,000 iii) the purchasing department could negotiate better credit terms and thereby increase accounts payable by $2,000. Also, the company thinks that these changes would not affect either sales or the costs of goods sold. If the changes above were made, by how many days would the cash conversion cycle be lowered?

Granada Inc. considers the following: i) a developed inventory management system could lower the average inventory by $4,000 ii) improvements in the credit department could reduce account receivables by $2,000 iii) the purchasing department could negotiate better credit terms and thereby increase accounts payable by $2,000. Also, the company thinks that these changes would not affect either sales or the costs of goods sold. If the changes above were made, by how many days would the cash conversion cycle be lowered?

Name: 2Below are some financial data of Granada Inc.Annual sales: unchanged
Uploaded: 2024-03-20T06:32:37.000Z
Channel: Bartleby
Description: 2Below are some financial data of Granada Inc.Annual sales: unchangedCost of goods sold: unchangedAverage inventory: lowered by $4,000Average receivables: lowered by $2,000Average payables: increased by $2,000Days in yearOriginal110,00080,00020,0001

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Similar questions

you a controller and the company always aim sustainable net income, but the company for this year had extremely high income due to increase of sales , so the president ask you to increase the yearly allowance for doubtful account from 4% to 6% of net credit sales because he is nervous the stockholders might expect the company to always be able to sustain such a high net income. Q/ as controller what actions should you take and whay ? If
Another way to look at the concept of inventory turnover is by measuring sales per square foot. Taking the average inventory at retail and dividing it by the number of square feet devoted to a particular product will give you average sales per square foot. When you multiply this figure by the inventory turnover rate, you get the annual sales per square foot. It is important to know the amount of sales per square foot your merchandise is producing, both on average and annually. These figures should be tracked monthly and compared with industry standards for businesses of similar size and type. You own a large multi product electronics store in a regional mall. The store has 10,200 square feet of selling space divided into five departments. (a) From the table below, calculate the average and annual sales (in $) per square foot. Then calculate the annual sales (in $) for each department and the total sales (in $) for the entire store. (Round your average and annual sales per square…
Company A's gross profit rate last year was 32.0% and this year it is 28.4%. Which of the following would not be a possible cause for this decline in the gross profit rate? O Company A's average margin between unit selling price and inventory unit cost is decreasing. O Company A may have seen a decline in total gross profit while maintaining net sales. Company A may have begun selling products with a higher markup. O Company A must have paid higher prices to suppliers without passing these costs on to customers.
Another way to look at the concept of inventory turnover is by measuring sales per square foot. Taking the average inventory at retail and dividing it by the number of square feet devoted to a particular product will give you average sales per square foot. When you multiply this figure by the inventory turnover rate, you get the annual sales per square foot. It is important to know the amount of sales per square foot your merchandise is producing, both on average and annually. These figures should be tracked monthly and compared with industry standards for businesses of similar size and type. You own a large multi product electronics store in a regional mall. The store has 10,600 square feet of selling space divided into five departments. (a) From the table below, calculate the average and annual sales (in $) per square foot. Then calculate the annual sales (in $) for each department and the total sales (in $) for the entire store. (Round your average and annual sales per square foot…
Ready Electronics is facing stiff competition from imported goods. Its operating income margin has been declining steadily for the past several years. The company has been forced to lower prices so that it can maintain its market share. The operating results for the past 3 years are as follows: Year 1 Year 2 Year 3 Sales 14,500,000 9,500,000 9,000,000 Operating income 1,200,000 1,145,000 945,000 Average assets 15,000,000 15,000,000 16,750,000 For the coming year, Ready's president plans to install a JIT purchasing and manufacturing system. She estimates that inventories will be reduced by 70% during the first year of operations, producing a 20% reduction in the average operating assets of the company, which would remain unchanged without the JIT system. She also estimates that sales and operating income will be restored to Year 1 levels because of simultaneous reductions in operating expenses and selling prices. Lower selling prices will allow Ready to expand its market share. 1.…
Williams & Sons last year reported sales of $38 million, cost of goods sold (COGS) of $30 million, and an inventory turnover ratio of 5. The company is now adopting a new inventory system. If the new system is able to reduce the firm's inventory level and increase the firm's inventory turnover ratio to 6 while maintaining the same level of sales and COGS, how much cash will be freed up? Do not round intermediate calculations. Enter your answer in dollars. For example, an answer of $1.23 million should be entered as 1,230,000,000. Round your answer to the nearest dollar. $
A. Management has developed a new inventory management system that it projects will reduce company inventory from $15,000,000 at the beginning of the next operating year to $12,000,000 at the end of the next operating year: will cash be generated by inventory or needed to fund inventory? And, by how much? a. $3,000,000 of cash generated by reducing inventory b. $12,000,000 of cash needed to fund inventory c. $254,000 of cash needed to fund the inventory reduction program d. $3,000,000 needed to fund inventory B. Accounts payable are projected to be $300,000 at the beginning of the next operating year and $500,000 at the end of the next operating year: will cash be generated by accounts payable or needed to fund accounts payable? And, by how much? a. $200,000 of cash generated by the increase in accounts payable (borrowed more money) b. $500,000 of cash needed to fund accounts payable c. $200,000 of cash needed to fund accounts payable d. No cash will be…
Williams & Sons last year reported sales of $127 million, cost of goods sold (COGS) of $105 and an inventory turnover ratio of 5. The company is now adopting a new inventory system. If the new system is able to reduce the firm's inventory level and increase the firm's inventory turnover ratio to 7 while maintaining the same level of sales and COGS, how much cash will be freed up? Do not round intermediate calculations. Round your answer to the nearest dollar.
Dream Corporation is trying to improve its inventory control system and has installed an online computer at its retail stores. Howe anticipates sales of 126,000 units per year, an ordering cost of P4 per order, and carrying costs of P1.008 per unit. The following year, the company learns it can reduce ordering costs to P1 per order but that carrying costs will stay the same at P1.008 per unit. What is the total cost of inventory to be expected?
Dengar