Q4: 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 $2.1 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. a. What is Aztec Products' operating cycle (OC) and cash conversion (CCC)? b. How many dollars of resources does Aztec have invested in (1) inventory, (2) accounts receivable, (3) accounts payable, and (4) the total CCC? c. If Aztec could shorten its cash conversion cycle by reducing its inventory holding period by 5 days, what effect would it have on its total resource investment found in part b?

Q4: 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 $2.1 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. a. What is Aztec Products' operating cycle (OC) and cash conversion (CCC)? b. How many dollars of resources does Aztec have invested in (1) inventory, (2) accounts receivable, (3) accounts payable, and (4) the total CCC? c. If Aztec could shorten its cash conversion cycle by reducing its inventory holding period by 5 days, what effect would it have on its total resource investment found in part b?

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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Edwards Industries has $320 million in sales. The companyexpects that its sales will increase 12% this year. Edwards’ CFO uses a simple linearregression to forecast the company’s receivables level for a given level of projected sales.On the basis of recent history, the estimated relationship between receivables and sales (inmillions of dollars) is as follows:Receivables = $9.25 + 0.07(Sales)Given the estimated sales forecast and the estimated relationship between receivables andsales, what are your forecasts of the company’s year-end balance for receivables and itsyear-end days sales outstanding (DSO) ratio? Assume that DSO is calculated on the basisof a 365-day year.
Provide correct solution
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. How much resources must be invested to support its Cash Conversion Cycle? B. If the firm pays 14% for these resources, by how much would it increase its annual profits by favorably changing its Current Cash Conversion Cycle by 20 days.
Select all that are true with respect to historical data on risk and return in the U.S. financial markets since about 1926, Group of answer choices A portfolio of small stocks has earned higher returns than large stocks, with less risk A portfolio of small stocks has earned higher returns that large stocks, with higher risk Stocks have outperformed government bonds, albeit with higher risk With respect to a diversified stock portfolio, the longer the holding period, the higher the risk. With respect to a diversified stock portfolio, the longer the holding period, the lower the risk.
Hardrock Hardware PLC estimate a cash of $2 500 000 over the next five months. This amount is available to the firm in the form of marketable securities. It can earn 10% annual yield on its marketable securities. Conversion of marketable securities into cash entails a fixed cost of $750 per transaction.Determine:i. Optimum cash balance ii. Average cash holding iii. Number of transactions iv. Average number of days per transaction (assume 30 days per month) v. Total cost of holding cash balancevi. Per day usage of cash
Cash conversion cycle American Products is concerned about managing cash effi-ciently. On average, inventories have an age of 80 days, and accounts receivable are collected in 40 days. Accounts payable are paid approximately 30 days after they arise. The firm has annual sales of about $30 million. Goods sold total $20 million, and purchases are $15 million. c. Calculate the amount of resources needed to support the firm’s cash conversion cycle?
Stratosphere Wireless is examining its cash conversion cycle. The company expects its cost of goods sold, which equals 60 percent of sales, to be $144,000 this year. Stratosphere normally turns over inventory 24 times per year, accounts receivable is turned over 12 times per year, and the accounts payable turnover is 45. Assume there are 360 days in a year. Calculate the cash conversion cycle. Round your answer to the nearest whole number. days Calculate the average balances in accounts receivable, accounts payable, and inventory. Round your answers to the nearest dollar. Accounts receivable: $ Accounts payable: $ Inventory: $
Watts Industries' carries 87 days in Inventory, and collects its Accounts Receivable in 75 days. If the firm pays its Accounts Payable in 26 days, what is Watts' Cash Conversion Cycle?
None
Problem 2. Lexberville Company expects to make even monthly cash payments of P166,666.67 during the year. The average return on money market placements is 8% p.a. and payment for cash transfer is expected to be P242 per transaction. Requirements: 5. Transaction cost at the optimum cash balance. (round to nearest whole number) 6. Transaction cost at P40,000 cash balance. 7. Opportunity cost at P500,000 cash balance.
Average daily sales of Chase Pumping Goods are Rs. 100,000. Average accounts receivable of Chase has Rs. 2 million and in inventory Rs.5 million. The company’s payables deferral period is 30 days. What is the length of the company’s cash conversion cycle?
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.

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