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?
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?
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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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?
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(i) Inventory = (60.83 – 54.75) ´ $32,876.7123 = $199,890.41.
(ii) Receivables = (73 – 65.70) ´ $41,095.8904 = $300,000.
(iii) Payables = (33.46 – 30.42) ´ $32,876.7123 = $99,945.21
How did you compute the $32,876.7123 for inventory, $41,095.8904 for receivables, and $32,876.7123 for payables?
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