m Afrooz is a leading producer of automobile batteries. It turns out 1,500 batteries a day at a cost of Tk. 6 per battery for materials and labor. It takes the firm 22 days to convert raw materials into the battery. It allows its customers 40 days in which to pay for the batteries and the firm generally pays its suppliers in 30 days. a) What is the length of cash conversion cycle? b) If the firm always produces and sales 1,500 batteries a day, what amount of working capital must it finance? c) By what amount would the firm reduce its working capital financing needs if it was able to stretch its payables deferral period to 35 days?
m Afrooz is a leading producer of automobile batteries. It turns out 1,500 batteries a day at a cost of Tk. 6 per battery for materials and labor. It takes the firm 22 days to convert raw materials into the battery. It allows its customers 40 days in which to pay for the batteries and the firm generally pays its suppliers in 30 days. a) What is the length of cash conversion cycle? b) If the firm always produces and sales 1,500 batteries a day, what amount of working capital must it finance? c) By what amount would the firm reduce its working capital financing needs if it was able to stretch its payables deferral period to 35 days?
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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Rahim Afrooz is a leading producer of automobile batteries. It turns out 1,500 batteries a day at a cost of Tk. 6 per battery for materials and labor. It takes the firm 22 days to convert raw materials into the battery. It allows its customers 40 days in which to pay for the batteries and the firm generally pays its suppliers in 30 days.
- a) What is the length of cash conversion cycle?
- b) If the firm always produces and sales 1,500 batteries a day, what amount of working capital must it finance?
- c) By what amount would the firm reduce its working capital financing needs if it was able to stretch its payables deferral period to 35 days?
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