LG Electronics reported a substantial accounts receivable balance of $8.2 billion at the end of fiscal year 2023, which was notably higher than their previous year's balance of $6.1 billion, while their announced credit policy remained unchanged with the same net 30- day payment terms. The company's total sales for 2023 were $62.4 billion, compared to $58.8 billion in 2022. The CFO has expressed concerns about the growing receivables despite only a modest increase in sales. If LG Electronics maintains a 365-day year for calculation purposes, what is the difference in their Days Sales Outstanding (DSO) between 2023 and 2022, and what might this indicate about their collection efficiency? Canon Inc. has been evaluating its inventory management system after noticing concerning trends in its financial metrics. In 2023, Canon reported annual cost of goods sold (COGS) of ¥2.8 trillion and average inventory of ¥420 billion, while in 2022, their COGS was ¥2.6 trillion with average inventory of ¥380 billion. The company operates using a 365-day year for all calculations and wants to understand how efficiently they're managing their inventory compared to the previous year. The management team is particularly concerned about the impact of their expanding product line on inventory turnover. The Chief Operations Officer has asked for a detailed analysis of the company's inventory management efficiency between these two periods. What is the inventory turnover ratio and days inventory outstanding (DIO) for both years, and what conclusions can be drawn from these calculations?
LG Electronics reported a substantial accounts receivable balance of $8.2 billion at the end of fiscal year 2023, which was notably higher than their previous year's balance of $6.1 billion, while their announced credit policy remained unchanged with the same net 30- day payment terms. The company's total sales for 2023 were $62.4 billion, compared to $58.8 billion in 2022. The CFO has expressed concerns about the growing receivables despite only a modest increase in sales. If LG Electronics maintains a 365-day year for calculation purposes, what is the difference in their Days Sales Outstanding (DSO) between 2023 and 2022, and what might this indicate about their collection efficiency? Canon Inc. has been evaluating its inventory management system after noticing concerning trends in its financial metrics. In 2023, Canon reported annual cost of goods sold (COGS) of ¥2.8 trillion and average inventory of ¥420 billion, while in 2022, their COGS was ¥2.6 trillion with average inventory of ¥380 billion. The company operates using a 365-day year for all calculations and wants to understand how efficiently they're managing their inventory compared to the previous year. The management team is particularly concerned about the impact of their expanding product line on inventory turnover. The Chief Operations Officer has asked for a detailed analysis of the company's inventory management efficiency between these two periods. What is the inventory turnover ratio and days inventory outstanding (DIO) for both years, and what conclusions can be drawn from these calculations?
Chapter3: Evaluation Of Financial Performance
Section: Chapter Questions
Problem 3P
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Transcribed Image Text:LG Electronics reported a substantial accounts receivable balance of
$8.2 billion at the end of fiscal year 2023, which was notably higher
than their previous year's balance of $6.1 billion, while their
announced credit policy remained unchanged with the same net 30-
day payment terms. The company's total sales for 2023 were $62.4
billion, compared to $58.8 billion in 2022. The CFO has expressed
concerns about the growing receivables despite only a modest increase
in sales. If LG Electronics maintains a 365-day year for calculation
purposes, what is the difference in their Days Sales Outstanding
(DSO) between 2023 and 2022, and what might this indicate about
their collection efficiency? Canon Inc. has been evaluating its
inventory management system after noticing concerning trends in its
financial metrics. In 2023, Canon reported annual cost of goods sold
(COGS) of ¥2.8 trillion and average inventory of ¥420 billion, while
in 2022, their COGS was ¥2.6 trillion with average inventory of
¥380 billion. The company operates using a 365-day year for all
calculations and wants to understand how efficiently they're managing
their inventory compared to the previous year. The management team
is particularly concerned about the impact of their expanding product
line on inventory turnover. The Chief Operations Officer has asked
for a detailed analysis of the company's inventory management
efficiency between these two periods. What is the inventory turnover
ratio and days inventory outstanding (DIO) for both years, and what
conclusions can be drawn from these calculations?
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