La Sorpresa de Ayer, S.A., a leading local company, knows that in order to know the rotations necessary to quantify its cash cycle, it is essential to apply some financial ratios. So how often it pays its suppliers, how often it rotates its inventories, and how often it charges its customers, will have to be calculated with the following data: Total sales of the company..........................$4'586,109.47 Proportion of credit sales....................... 65% Average customer balance............................. $ 372,621.40 Cost of sales ratio...................... 65% Average inventory balance...................... $ 420,393.37 Average supplier balance................... $ 288,004.21 Beginning inventory................................................ $ 358,554.55 The company spends about $12.350 million in operating cycle investments. With this data it is necessary to calculate: 1) The operating cycle. 2) The cash conversion cycle. 3) The cash turnover.
PLEASE, PERFORM THE EXERCISE IN EXCEL AND SHOW THE FORMULAS
1. La Sorpresa de Ayer, S.A., a leading local company, knows that in order to know the rotations necessary to quantify its cash cycle, it is essential to apply some financial ratios. So how often it pays its suppliers, how often it rotates its inventories, and how often it charges its customers, will have to be calculated with the following data:
Total sales of the company..........................$4'586,109.47
Proportion of credit sales....................... 65%
Average customer balance............................. $ 372,621.40
Cost of sales ratio...................... 65%
Average inventory balance...................... $ 420,393.37
Average supplier balance................... $ 288,004.21
Beginning inventory................................................ $ 358,554.55
The company spends about $12.350 million in operating cycle investments. With this data it is necessary to calculate:
1) The operating cycle.
2) The cash conversion cycle.
3) The cash turnover.
4) The minimum cash balance.
Note:
In the image, this is the original exercise, it is in Spanish, but it is easy to understand.
Very important Note:
It is necessary that you make a solution approach and then the result. Above all, to check the procedure and/or the formulas used, especially when you use excel.
please... understand the context of the exercise in Spanish, it is easy to understand
----------------------------
Formulas (those given to me by the professor, this to guide you as a bartleby expert.)
-Accounts receivable turnover
Sales (on credit) / Average customer balance.
-Average collection period:
360 /accounts receivable turnover
------------------------------------------------------------------
-Inventory turnover
Cost of sales / average inventory
-Average inventory age
360/inventory turnover
------------------------------------------------------------------
-Accounts Payable Rotation
STEP ONE: Determine Ending Inventory
STEP TWO: Determine Purchases
STEP THREE:
-Calculate accounts payable turnover.
Purchases / Average supplier balance
-Average payment period
360/accounts payable turnover
------------------------------------------------------------------
Operating Cycle = Average age of inventory + Average collection period
Cash Conversion Cycle = Average payable period - Cash cycle
Cash Turnover = 360 / Cash Conversion Cycle
Minimum Cash Balance = Annual Expense / Cash Turnover
------------------------------------------------------------------
Step by step
Solved in 3 steps
