None Last year the company reported a sale ofUSD 8 million and an inventory turnoverratio of 4. It is now opting for a new inventorysystem that is able to reduce the firm'sinventory level and increase the firm'sinventory turnoverturnover ratio to 6 whilemaintaining the same level of sales.How much cash will be freed up?

The problem involves the determination of the freed-up cash due to the improvement in the firm's…

Answered: Last year the company reported a sale…

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter21: Supply Chains And Working Capital Management

Section: Chapter Questions

Problem 1P

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Negus Enterprises has an inventory conversion period of 50 days, an average collection period of 35 days, and a payables deferral period of 25 days. Assume that cost of goods sold is 80% of sales. What is the length of the firm’s cash conversion cycle? If annual sales are $4,380,000 and all sales are on credit, what is the firm’s investment in accounts receivable? How many times per year does Negus Enterprises turn over its inventory?
How much cash will be freed up?
Williams & Sons last year reported sales of $15 million, cost of goods sold (COGS) of $12 million, and an inventory turnover ratio of 2. 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. $
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A company has $20 million in cost of goods sold and an inventoryturnover ratio of 2.0. If it can reduce its inventory and improve itsinventory turnover ratio to 2.5 with no loss in units sold and no changein cost of goods sold, by how much will FCF increase? ($2 million)
A company has P20 million in sales and an inventory turnover ratio of 2.0. If it can reduce it's inventory and improve it's inventory turnover ratio to 2.5 with no loss in sales, by how much will FCF increase?
Which of the following statements is TRUE? When EBIT and total assets both increase by 25%, the basic earnings power will also increase O a. An increase in the quick ratio over time means that the company's liquidity position is improving. O b. approximately by 25%. A lower than the industry's average inventory turnover ratio means that the company turns over or sells O C. and replaces its inventory more times per year. A higher than industry average P/E ratio indicates the company's stock must be overvalued. d.
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A firm with sales of $500,000 has average inventory of $200,000. the industry average for inventory turnover is four time a year. what would be the reduction in inventory if this firm were to achieve a turnover comparable to the industry average?
Lance Motors has current assets of $1.2 million. The company’s current ratio is 1.2, its quick ratio is 0.7, and its inventory turnover ratio is 4. The company would like to increase its inventory turnover ratio to the industry average, which is 5, without reducing its sales. Any reductions in inventory will be used to reduce the company’s current liabilities. What will be the company’s current ratio, assuming that it is successful in improving its inventory turnover ratio to 5?
Chastain Corporation is trying to determine the effect of its inventory turnover ratio and days sales outstanding (DSO) on its cash conversion cycle. Chastain's 2018 sales (all on credit) were $106,000; its cost of goods sold is 80% of sales; and it earned a net profit of 4%, or $4,240. It turned over its inventory 6 times during the year, and its DSO was 40 days. The firm had fixed assets totaling $27,000. Chastain's payables deferral period is 35 days. Assume 365 days in year for your calculations. Calculate Chastain's cash conversion cycle. Do not round intermediate calculations. Round your answer to two decimal places. days Assuming Chastain holds negligible amounts of cash and marketable securities, calculate its total assets turnover and ROA. Do not round intermediate calculations. Round your answers to two decimal places. Total assets turnover ROA % Suppose Chastain's managers believe that the inventory turnover can be raised to 9.4 times. What would…
A firm is considering several policy changes to increase sales. It will increase the variety of goods it keeps in inventory, but this will increase inventory by $11,500. It will offer more liberal sales terms, but this will result in average receivables increasing by $68,000. These actions are expected to increase sales by $815,000 per year, and cost of goods will remain at 70% of sales. Because of the firm’s increased purchases for its own production needs, average payables will increase by $36,500. What effect will these changes have on the firm’s cash cycle? (Use 365 days in a year. Do not round your intermediate calculations. Round your answer to 2 decimal places.) What is the change in cash cycle? Answer in Excel and show formulas please.

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