NEW MyLab Finance with Pearson eText -- Access Card -- for Fundamentals of Corporate Finance
3rd Edition
ISBN: 9780133543889
Author: Jonathan Berk, Peter DeMarzo, Jarrad Harford
Publisher: PEARSON
expand_more
expand_more
format_list_bulleted
Videos
Textbook Question
Chapter 19, Problem 6P
The Greek Connection had sales of $32 million in 2015, and a cost of goods sold of $20 million. A simplified
a. Calculate The Greek Connection’s net working capital in 2015.
b. Calculate the cash conversion cycle of The Greek Connection in 2015.
c. The industry average accounts receivable days is 30 days. What would have been the cash conversion cycle for The Greek Connection in 2015 had it matched the industry average for accounts receivable days (see MyFinanceLab for the data in Excel format)?
The Greek Connection
Balance Sheet as of December 31, 2015
(thousands of dollars)
| Assets | |||
| Cash | $2,000 | Accounts payable | $1,500 |
| Accounts receivable | 3,950 | Notes payable | 1,000 |
| Inventory | 1,300 | Accruals | 1,220 |
| Total current assets | $7,250 | Total current liabilities | $3,720 |
| Net plant, property, and equipment | 8,500 | Long-term debt | $3,000 |
| Total liabilities | $6,720 | ||
| Total assets | $15,750 | Common equity | $9,030 |
| Total liabilities and equity | $15,750 |
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Use the financial statements supplied below for International Motor Corporation(IMC) to answer the following questions.
Calculate the cash conversion cycle for IMC for both 2015 and 2016. What change has occurred, if any? All else being equal, how does this change affect IMC’s need for cash?
IMC’s suppliers offer terms of Net 30. Does it appear that IMC is doing a good job of managing its accounts payable?
Romano Inc. has the following data. What is the firm's cash conversion cycle?
Inventory Conversion Period =
59 days
Receivables Collection Period =
19 days
Payables Deferral Period =
41 days
Please explain process and show calculations.
FMT Trading Inc. has the following financial data:
Annual sales 10,000,000Cost of goods sold 6,000,000Inventory 2,547,945Accounts receivable 1,643,836Accounts payable 1,200,000
a. What is the firm’s cash conversion cycle?b. Provide interpretations of the cash conversion cycle period of the firm.
Chapter 19 Solutions
NEW MyLab Finance with Pearson eText -- Access Card -- for Fundamentals of Corporate Finance
Ch. 19 - Prob. 1CCCh. 19 - Prob. 2CCCh. 19 - Prob. 3CCCh. 19 - Prob. 4CCCh. 19 - Prob. 5CCCh. 19 - Prob. 6CCCh. 19 - Prob. 7CCCh. 19 - Prob. 8CCCh. 19 - Prob. 9CCCh. 19 - Prob. 10CC
Ch. 19 - Prob. 11CCCh. 19 - Prob. 12CCCh. 19 - Prob. 1CTCh. 19 - Prob. 2CTCh. 19 - 3. Does an increase in a firm’s cash cycle...Ch. 19 - Prob. 4CTCh. 19 - Prob. 5CTCh. 19 - Prob. 6CTCh. 19 - Prob. 7CTCh. 19 - Prob. 8CTCh. 19 - Prob. 9CTCh. 19 - Prob. 10CTCh. 19 - Which of the following short-term securities would...Ch. 19 - Prob. 1DCCh. 19 - Prob. 2DCCh. 19 - Prob. 3DCCh. 19 - Prob. 4DCCh. 19 - Prob. 5DCCh. 19 - Prob. 6DCCh. 19 - Prob. 7DCCh. 19 - Prob. 8DCCh. 19 - Prob. 1PCh. 19 - Prob. 2PCh. 19 - Prob. 3PCh. 19 - Prob. 4PCh. 19 - Prob. 5PCh. 19 - The Greek Connection had sales of $32 million in...Ch. 19 - Assume the credit terms offered to your firm by...Ch. 19 - Prob. 8PCh. 19 - Prob. 9PCh. 19 - Prob. 10PCh. 19 - Prob. 11PCh. 19 - Prob. 12PCh. 19 - Prob. 13PCh. 19 - Prob. 14PCh. 19 - Use the financial statements supplied below and on...Ch. 19 - Prob. 16PCh. 19 - Prob. 17P
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.Similar questions
- Please provide correct answer accounting....arrow_forwardAn analyst gathers the following data for a firm: Sales: $1, 850 Cost of Goods Sold: $501 Inventory: $124 Accounts Receivables: $188 Accounts Payables: $153 Based on this information, calculate the firm's Operating Cash Conversion Cycle.arrow_forwardRefer to Samsung’s statement of cash flows for the year ended December 31, 2017. 1. What amount (in millions of Korean won) did Samsung spend to acquire property, plant, and equipment during 2017? 2. Assume the investment in part 1 is expected to generate annual net cash flows of 7,000,000 (in millions of Korean won) per year for the next 10 years. Compute the net present value of the investment, using a discount rate of 9%.arrow_forward
- 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?arrow_forwardYou have recently been hired to improve the performance of Multiplex Corporation, which has been experiencing a severe cash shortage. As one part of your analysis, you want to determine the firm's cash conversion cycle. Using the following Information and a 365-day year, your estimate of the firm's current cash conversion cycle would be __________days Current Inventory = P120,000. Accounts receivable = P157,808. Accounts payable = P25,000. Annual sales P600,000. Total annual purchases = P365,000. Purchases credit terms: net 30 days. Receivables credit terms: net 50 days. O 100 O 49 O 144 O 168arrow_forwardWhat is the length of the firm's cash conversion cycle on these accounting question?arrow_forward
- Your consulting firm was recently hired to improve the performance of RP Inc, which is highly profitable but has been experiencing cash shortages due to its high growth rate. As one part of your analysis. you want to determine the firm's cash conversion cycle. Using the following information and a 365-day year, what is the firm's present cash conversion cycle? Average inventory Annual sales Annual cost of goods seld Average accounts receivable Average accunts payable P5.000 P00.000 PH0,000 P0,000 F5000 140.6 days 120.6 days 133.6 days 148.0 days O 126.9 daysarrow_forwardYour boss asks you to compute your company's cash conversion cycle. Looking at the financial statements, you see that the average inventory for the year was $24,800, accounts receivable averaged $18,700, and accounts payable averaged $16,100. You also see that the company had sales of $138,000 and that cost of goods sold was $110,400. Calculate firm's cash conversion cycle. (Use 365 days for calculation. Round intermediate calculations and final answer to 1 decimal place, e.g. 15.1.)arrow_forwardQ4: 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? d) If Dean Muhammad Suppliers receive an invoice for purchases dated 12/12/2002 subject to credit terms of…arrow_forward
- Whaley & Whaley has the following data. What is the firm's cash conversion cycle? Inventory conversion period = Average collection period = Payables deferral period = O a. 37 days O b. 31 days O c. 41 days Od: 45 days O e. 34 days 41 days 31 days 38 daysarrow_forwardAntonio is an analyst at Barrilla Group. The firm turns over its inventory 5 times each year. It has an average collection period of 50 days and an average payment period of 20 days. The firm’s annual sales are €12 million. Assume there is no difference in the investment per euro of sales in inventory, receivables, and payables, and assume a 365-day year.a.Calculate the firm’s cash conversion cycle, its daily cash operating expenditure, and the amount of resources needed to support its cash conversion cycle.b.Find the firm’s cash conversion cycle and resource investment requirement if it makes the following changes simultaneously.(1)Shortens the average age of inventory by 10 days.(2)Speeds the collection of accounts receivable by an average of 15 days.(3)Extends the average payment period by 5 days.c.If the firm pays 15% for its resource investment, by how much, if anything, could it increase its annual profit as a result of changes in part b?d.If the annual cost of achieving the…arrow_forwardPark company reported an increase of $370,000 in its account receivable during the year 2015.arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
EBK CONTEMPORARY FINANCIAL MANAGEMENTFinanceISBN:9781337514835Author:MOYERPublisher:CENGAGE LEARNING - CONSIGNMENT
EBK CONTEMPORARY FINANCIAL MANAGEMENT
Finance
ISBN:9781337514835
Author:MOYER
Publisher:CENGAGE LEARNING - CONSIGNMENT
Financial ratio analysis; Author: The Finance Storyteller;https://www.youtube.com/watch?v=MTq7HuvoGck;License: Standard Youtube License