Margetis Inc. carries an average inventory of $825,000. Its annual sales are $11 million, its cost of goods sold are 75% of annual sales, and its receivables collection period is twice as long as its inventory conversion period. The firm buys on terms of net 30 days, and it pays on time. Its new CFO wants to decrease the cash conversion cycle by 20 days, based on a 365-day year. He believes he can reduce the average inventory to $677,245 with no effect on sales. By how much must the firm also reduce its accounts receivable to meet its goal in the reduction of its cash conversion cycle? Do not round your intermediate calculations. a. $341,239 b. $854,300 c. $454,985 d. $405,733 e. $394,013
Margetis Inc. carries an average inventory of $825,000. Its annual sales are $11 million, its cost of goods sold are 75% of annual sales, and its receivables collection period is twice as long as its inventory conversion period. The firm buys on terms of net 30 days, and it pays on time. Its new CFO wants to decrease the cash conversion cycle by 20 days, based on a 365-day year. He believes he can reduce the average inventory to $677,245 with no effect on sales. By how much must the firm also reduce its accounts receivable to meet its goal in the reduction of its cash conversion cycle? Do not round your intermediate calculations. a. $341,239 b. $854,300 c. $454,985 d. $405,733 e. $394,013
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 11P: Negus Enterprises has an inventory conversion period of 50 days, an average collection period of 35...
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Question
Margetis Inc. carries an average inventory of $825,000. Its annual sales are $11 million, its cost of goods sold are 75% of annual sales, and its receivables collection period is twice as long as its inventory conversion period. The firm buys on terms of net 30 days, and it pays on time. Its new CFO wants to decrease the cash conversion cycle by 20 days, based on a 365-day year. He believes he can reduce the average inventory to $677,245 with no effect on sales. By how much must the firm also reduce its accounts receivable to meet its goal in the reduction of its cash conversion cycle? Do not round your intermediate calculations.
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Kirk Development buys on terms of 2/15, net 45 days. It does not take discounts, and it typically pays on time, 45 days after the invoice date. Net purchases amount to $350,000 per year. On average, what is the dollar amount of total trade credit (costly + free) the firm receives during the year, i.e., what are its average accounts payable? (Assume a 365-day year, and note that purchases are net of discounts.)
a. $43,151 |
b. $14,384 |
c. $42,288 |
d. $14,096 |
e. $28,767 |
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