Subject: general accounting question Phoenix Manufacturing wants to evaluate its cash conversion cycle (CCC).Financial analysis reveals that on average the company holds items in inventoryfor 72 days, pays its suppliers 40 days after purchase, and collects its receivablesafter 48 days. The company's annual sales (all on credit) are approximately $3.8billion, its cost of goods sold represents about 70% of sales, and purchasesrepresent about 45% of the cost of goods sold. Assume a 365-day year. What isPhoenix Manufacturing's cash conversion cycle (CCC)?

Step 1: Define Cash Conversion Cycle (CCC)The Cash Conversion Cycle (CCC) measures the time it takes…

Answered: Phoenix Manufacturing wants to evaluate…

Corporate Fin Focused Approach

5th Edition

ISBN:9781285660516

Author:EHRHARDT

Publisher:EHRHARDT

Chapter16: Supply Chains And Working Capital Management

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Problem 11P

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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?
Aztec Products wishes to evaluate its cash conversion cycle (CCC). Research by one of the firm’s financial analysts indicates that on average the firm holds items in inventory for 65 days, pays its suppliers 35 days after purchase, and collects its receivables after 55 days. The firm’s annual sales (all on credit) are about R2.1 billion, its cost of goods sold represent about 67 percent of sales, and purchases represent about 40 percent of cost of goods sold. Assume a 365-day year. What is Aztec Products’ cash conversion (CCC)? If Aztec could shorten its CCC by 5 days, would it be best to reduce the inventory holding period, reduce the receivable collection period, or extend the accounts payable period? Why? How should the firm manage its inventory, accounts receivable, and accounts payable in order to reduce the length of its cash conversion cycle?
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Heritage Farms has sales of $1.62 million with costs of goods sold equal to 78 percent of sales. The average inventory is $369,000, accounts payable average $438,000, and receivables average $147,000. How long is the cash conversion cycle?
(16-11) Cash Conversion 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. Cycle a. What is the length of the firm's cash conversion cycle? b. If annual sales are $4,380,000 and all sales are on credit, what is the firm's investment in accounts receivable? C. How many times per year does Negus Enterprises turn over its inventory?
X Pvt. Ltd. is a Canadian company and wishes to evaluate its cash conversion cycle (CCC). Your preliminary research has identified that on average the inventory is hold for 65 days; payment to suppliers takes 35 days; credit sales are collected in 55 days. The firm's annual sales are all on credit and amounts to 2.1 million CAD. Cost of goods sold is 67% of sales. Purchases is around 40% of cost of goods sold. Assume a 365-day year. 1. What is X's Products' operating cycle (OC) and cash conversion (CCC)? 2. How much has X Pvt. Ltd invested in (1) inventory, (2) accounts receivable, (3) accounts payable, and (4) the total CCC? 3. If X Pvt. Ltd shortened its cash conversion cycle by reducing its inventory holding period by 5 days, what would be the total investment in CCC? 4. You are asked to shorten Nepal handicraft's CCC by 5 days. Would you reduce the inventory holding period, the receivable collection period, or extend the accounts payable period? Why? What would be amount of…
Berry Manufacturing turns over its inventory 8 times each year, has an Average Payment Period of 35 days and has an Average Collection Period of 60 days. The firm’s annual sales are $3.5 million. Assume there is no difference in the investment per dollar of sales in inventory, receivable, and payables and that there is a 365-day year. A. Calculate the Firm’s Operating Cycle. B. Calculate the Firm’s Cash Conversion Cycle. C. Calculate the Firm’s Daily Cash Operating Expenditure.
As an operations management consultant, you have been asked to evaluate a furniture manufacturer's cash-to-cash conversion cycle under the following assumptions: sales of $23.6 million, cost of goods sold of $19.5 million, 50 operating weeks a year, total average on-hand inventory of $2,300,000, accounts receivable equal to $2,440,000, and accounts payable of $3,710,000. What is the cash-to-cash conversion cycle in weeks? Do not round intermediate calculations. Round your answer to one decimal place. week(s) What recommendations can you make to improve performance? -Select- ✓inventory weeks of supply and -Select- ✓accounts receivable weeks of supply or -Select- are ways to improve overall firm performance. accounts payable weeks of supply
What is the length of the firm's cash conversion cycle?
Suppose that LilyMac Photography has annual sales of $233,000, cost of goods sold of $168,000, average inventories of $4,800, average accounts receivable of $25,600, and an average accounts payable balance of $7,300.Assuming that all of LilyMac’s sales are on credit, what will be the firm’s cash cycle? (Use 365 days a year. Do not round intermediate calculations. Round your final answer to 2 decimal places.)
Suppose that LilyMac Photography has annual sales of $233,000, cost of goods sold of $168,000, average inventories of $4,800, average accounts receivable of $25,600, and an average accounts payable balance of $7,300. Assuming that all of LilyMac's sales are on credit, what will be the firm's cash cycle? (Use 365 days a year. Do not round intermediate calculations. Round your final answer to 2 decimal places.) What will be the firm's operating cycle? (Use 365 days a year. Do not round intermediate calculations. Round your final answer to 2 decimal places.)

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