Financial Management: Theory & Practice
16th Edition
ISBN: 9781337909730
Author: Brigham
Publisher: Cengage
expand_more
expand_more
format_list_bulleted
Question
Chapter 16, Problem 5MC
Summary Introduction
Case summary:
Chief financing officer of Company RR, a speciality coffee manufacturer, is re-thinking about its working capital policy and wants to re-new its line of credit and it wouldn’t ready to build payroll, probably forcing the company out of business.
The scare has forced the company to examine carefully about each component of working capital to make sure it is required, and decide whether the goal is to determine the line of credit are often eliminated entirely.
Previously, it has done little to look at assets and mainly because of poor communication among business functions and the decisions about working capital cannot be made at vacuum.
Characters in the case:
- Company RR and,
- Person J.
To discuss: Effect of reducing inventory by company without affecting sales on
Expert Solution & Answer
Trending nowThis is a popular solution!
Students have asked these similar questions
. If the company reduces its DSO without seriouslyaffecting sales, what effect would this have onfree cash flow (1) in the short run and (2) in thelong run?
Is this statement true or false? please explain in detail
The Discounted Cash Flow method is the one of best ways to assess the impact of a major investment in an alternative production lay out, as the gains efficiency will be counterbalanced by changes in in inventory levels
Why does Sales discounts are variable consideration?
Chapter 16 Solutions
Financial Management: Theory & Practice
Ch. 16 - Define each of the following terms:
Working...Ch. 16 - What are the two principal reasons for holding...Ch. 16 - Prob. 3QCh. 16 - Prob. 4QCh. 16 - Prob. 5QCh. 16 - Prob. 6QCh. 16 - Prob. 7QCh. 16 - Prob. 8QCh. 16 - What kinds of firms use commercial paper?
Ch. 16 - Prob. 1P
Ch. 16 - Medwig Corporation has a DSO of 17 days. The...Ch. 16 - What are the nominal and effective costs of trade...Ch. 16 - Prob. 4PCh. 16 - Prob. 5PCh. 16 - Snider Industries sells on terms of 2/10, net 45....Ch. 16 - Calculate the nominal annual cost of trade credit...Ch. 16 - Captain Whitman Ship Supplies offers terms of...Ch. 16 - Grunewald Industries sells on terms of 2/10, net...Ch. 16 - The D.J. Masson Corporation needs to raise...Ch. 16 - Negus Enterprises has an inventory conversion...Ch. 16 - Prob. 12PCh. 16 - Payne Products had 1.6 million in sales revenues...Ch. 16 - Dorothy Koehl recently leased space in the...Ch. 16 - Prob. 15PCh. 16 - Prob. 16PCh. 16 - The Raattama Corporation had sales of 3.5 million...Ch. 16 - Start with the partial model in the file Ch16 P18...Ch. 16 - Prob. 1MCCh. 16 - Prob. 2MCCh. 16 - Prob. 3MCCh. 16 - Is there any reason to think that RR may be...Ch. 16 - Prob. 5MCCh. 16 - Johnson knows that RR sells on the same credit...Ch. 16 - Prob. 7MCCh. 16 - Prob. 8MCCh. 16 - What is the impact of higher levels of accruals,...Ch. 16 - Assume that RR purchases $200,000 (net of...Ch. 16 - Prob. 11MCCh. 16 - Prob. 12MCCh. 16 - Prob. 13MCCh. 16 - Prob. 14MCCh. 16 - Prob. 15MCCh. 16 - In an attempt to better understand RR’s cash...
Knowledge Booster
Similar questions
- Why would a company choose to factor itsreceivables, given that it will get less money than thereceivables are worth?arrow_forwardAn increase in the discount rate will____ a. Reduce the present value of future cash flows b. Increase the present value of future cash flows c. Have no effect on net present value d. Compensate for reduced riskarrow_forwardHow would reported income differ if LIFO rather than FIFO were used when purchase prices are rising? When purchase prices are falling?arrow_forward
- In the case of decrease the operating cash cycle, which one of the following actions should be taken? A Delay payments to suppliers B Increase the inventory level while maintaining constant salesC Increase the period of time for which credit is granted to customers D Decrease the rate at which the average inventory is soldarrow_forwardIn financial markets, if there is an untapped profit opportunity, arbitrageurs will realize it and it will disappear. What does the EMH hypothesis say about the consequences of these arbitrageurs on prices?arrow_forwardAssuming everything else constant, which of the following will NOT make net profit margins increase? Decrease in Selling, General, and Administrative expenses. Increase in Research & Development expenses. Decrease Research & Development expenses. Decrease costs of goods sold.arrow_forward
- which one of the following will tend to increase the length of the credit period? Decrease in Product cost Decrease in consumer demand Decrease in collateral value Increase in credit risk Increase in product standardizationarrow_forwardI. Explain the tradeoff between the costs of having too much liquidity on the one hand and financial distress and insolvency on the other hand. II. What gives rise to, or causes, each. III. Give an example explaining both.arrow_forwardDuring periods of rising prices, which method (FIFO-LIFO-AVCO) results in the highest gross profit? Why?arrow_forward
- Th e Industry and Business Risk excerpt states that, “Increased competition may lead tolower unit sales and excess production capacity and excess inventory. Th is may result in afurther downward price pressure.” Th e downward price pressure could lead to inventorythat is valued above current market prices or net realizable value. Any write-downs ofinventory are least likely to have a significant eff ect on the inventory valued using:A. weighted average cost.B. first-in, first-out (FIFO).C. last-in, first-out (LIFO).arrow_forwardIn an inflationary environment: Multiple Choice a company's net income will be the same regardless of whether LIFO or FIFO is used. a company's net income will be higher if it uses LIFO than if it uses FIFO. a company's assets will be lower if it uses LIFO as opposed to FIFO cost flow. a company's cost of goods sold will be lower if it uses LIFO as opposed to FIFO.arrow_forwardWhich one of the following is an advantage of LIFO? a. In periods of rising prices, less income taxes are paid b. In periods of rising prices, more holding gains are reported in net income c. Record keeping and financial statement preparation are easier d. Conservative income statement and balance sheet disclousures result from falling pricesarrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Intermediate Financial Management (MindTap Course...FinanceISBN:9781337395083Author:Eugene F. Brigham, Phillip R. DavesPublisher:Cengage Learning
EBK CONTEMPORARY FINANCIAL MANAGEMENTFinanceISBN:9781337514835Author:MOYERPublisher:CENGAGE LEARNING - CONSIGNMENT
Cornerstones of Financial AccountingAccountingISBN:9781337690881Author:Jay Rich, Jeff JonesPublisher:Cengage Learning
Intermediate Financial Management (MindTap Course...
Finance
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Cengage Learning
EBK CONTEMPORARY FINANCIAL MANAGEMENT
Finance
ISBN:9781337514835
Author:MOYER
Publisher:CENGAGE LEARNING - CONSIGNMENT
Cornerstones of Financial Accounting
Accounting
ISBN:9781337690881
Author:Jay Rich, Jeff Jones
Publisher:Cengage Learning