Sphinx plc manufacturers a variety of electronic devices, including mobile phones, laptops, televisions and audio equipment. Sales are made directly to customers via Sphinx’s website. However, the majority of sales are through the retail networks of various third-party distributors, who operate both online and through high street stores. Sphinx is considering a number of changes to its operating model: Increasing sales volume by 30%, via a major marketing campaign, with no change to product lines or mix Increasing sales volume by 30%, through introduction of a variety of new product lines, that will be sold along with existing products Taking advantage of an early payment discount offered by its major raw material supplier Saving costs by downsizing the credit control team by 20% Reducing credit terms to 3rd party distributors from 90 to 60 days i) Which of the proposed changes is most likely to create a “pull on liquidity”? Explain your answer in a single sentence ii) Which of the proposed changes is most likely to create a “drag on liquidity”? Explain your answer in a single sentence
Sphinx plc manufacturers a variety of electronic devices, including mobile phones, laptops, televisions and audio equipment. Sales are made directly to customers via Sphinx’s website. However, the majority of sales are through the retail networks of various third-party distributors, who operate both online and through high street stores. Sphinx is considering a number of changes to its operating model: Increasing sales volume by 30%, via a major marketing campaign, with no change to product lines or mix Increasing sales volume by 30%, through introduction of a variety of new product lines, that will be sold along with existing products Taking advantage of an early payment discount offered by its major raw material supplier Saving costs by downsizing the credit control team by 20% Reducing credit terms to 3rd party distributors from 90 to 60 days i) Which of the proposed changes is most likely to create a “pull on liquidity”? Explain your answer in a single sentence ii) Which of the proposed changes is most likely to create a “drag on liquidity”? Explain your answer in a single sentence
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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Sphinx plc manufacturers a variety of electronic devices, including mobile phones, laptops, televisions and audio equipment. Sales are made directly to customers via Sphinx’s website. However, the majority of sales are through the retail networks of various third-party distributors, who operate both online and through high street stores.
Sphinx is considering a number of changes to its operating model:
- Increasing sales volume by 30%, via a major marketing campaign, with no change to product lines or mix
- Increasing sales volume by 30%, through introduction of a variety of new product lines, that will be sold along with existing products
- Taking advantage of an early payment discount offered by its major raw material supplier
- Saving costs by downsizing the credit control team by 20%
- Reducing credit terms to 3rd party distributors from 90 to 60 days
i) Which of the proposed changes is most likely to create a “pull on liquidity”? Explain your answer in a single sentence
ii) Which of the proposed changes is most likely to create a “drag on liquidity”? Explain your answer in a single sentence
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