Fundamentals of Corporate Finance (Mcgraw-hill/Irwin Series in Finance, Insurance, and Real Estate)
9th Edition
ISBN: 9781259722615
Author: Richard A Brealey, Stewart C Myers, Alan J. Marcus Professor
Publisher: McGraw-Hill Education
expand_more
expand_more
format_list_bulleted
Question
Chapter 20, Problem 29QP
a)
Summary Introduction
To compute: The average inventory period of company C.
b)
Summary Introduction
To compute: The value of firm upsurge when the firm decreases its average inventory period by 10 days.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solutionStudents have asked these similar questions
Hubble Space Incorporated has the following data which includes
inventory conversion period or ICP of the firms against which it
benchmarks. The firm's new manager is looking into the company on how
he could reduce its inventory enough to reduce its ICP to the benchmarks'
average. If this were done, by how much would inventories decrease?
Assume a 365-day year. Cost of goods sold =P85,000; Inventory
=P20,000; Inventory conversion period (ICP) =85.88; Benchmark inventory
conversion period (ICP) =38.00 *
P 7,316
P11,151
P 9,032
P10,036
O P 8,129
A company has $20 million in cost of goods sold and an inventoryturnover ratio of 2.0. If it can reduce its inventory and improve itsinventory turnover ratio to 2.5 with no loss in units sold and no changein cost of goods sold, by how much will FCF increase? ($2 million)
A company normally sells its product for $20 per unit. However, the selling price has fallen to $15 per unit. This company's current FIFO inventory consists of 200 units purchased at $16 per unit. Net realizable value has now fallen to $13 per unit. What is the amount of the lower cost of market adjustment the company must make as a result of this decline in value?
Chapter 20 Solutions
Fundamentals of Corporate Finance (Mcgraw-hill/Irwin Series in Finance, Insurance, and Real Estate)
Ch. 20 - Prob. 1QPCh. 20 - Prob. 3QPCh. 20 - Prob. 4QPCh. 20 - Prob. 5QPCh. 20 - Prob. 6QPCh. 20 - Prob. 7QPCh. 20 - Prob. 8QPCh. 20 - Prob. 9QPCh. 20 - Prob. 11QPCh. 20 - Prob. 13QP
Ch. 20 - Prob. 14QPCh. 20 - Prob. 15QPCh. 20 - Prob. 16QPCh. 20 - Prob. 17QPCh. 20 - Prob. 19QPCh. 20 - Prob. 20QPCh. 20 - Prob. 21QPCh. 20 - Prob. 22QPCh. 20 - Prob. 23QPCh. 20 - Prob. 27QPCh. 20 - Prob. 28QPCh. 20 - Prob. 29QPCh. 20 - Prob. 30QPCh. 20 - Prob. 31QPCh. 20 - Prob. 32QPCh. 20 - Prob. 33QPCh. 20 - Prob. 34QPCh. 20 - Prob. 35QPCh. 20 - Prob. 36QPCh. 20 - Prob. 37QPCh. 20 - Prob. 38QPCh. 20 - Prob. 39QPCh. 20 - Prob. 40QPCh. 20 - Prob. 41QPCh. 20 - Prob. 42QPCh. 20 - Prob. 43QPCh. 20 - Prob. 44QPCh. 20 - Prob. 45QP
Knowledge Booster
Similar questions
- Williams & Sons last year reported sales of $127 million, cost of goods sold (COGS) of $105 and an inventory turnover ratio of 5. The company is now adopting a new inventory system. If the new system is able to reduce the firm's inventory level and increase the firm's inventory turnover ratio to 7 while maintaining the same level of sales and COGS, how much cash will be freed up? Do not round intermediate calculations. Round your answer to the nearest dollar.arrow_forwardSJU Resources last year reported cost of goods sold of $35 million and an inventory turnover ratio of 2. The company is now adopting a new inventory system. If the new system is able to reduce the firm’s inventory level and increase the firm’s inventory turnover ratio to 3 while maintaining the same level of sales, how much cash will be freed up?arrow_forwardInventory Management Williams & Sons last year reported sales of $9 million, cost of goods sold (COGS) of $6 million, and an inventory turnover ratio of 2. The company is now adopting a new inventory system. If the new system is able to reduce the firm's inventory level and increase the firm's inventory turnover ratio to 6 while maintaining the same level of sales and COGS, how much cash will be freed up? Do not round intermediate calculations. Enter your answer in dollars. For example, an answer of $1.23 million should be entered as 1,230,000,000. Round your answer to the nearest dollar.arrow_forward
- Smith Corporation had Sales of $2,350,000 in 2021 and $2,125,000 in 2020. Cost of Good Sold were $1,400,000 in 2021 and $1,325,000 in 2020. a. What was the percentage change in Sales year to year? b. What was the percentage change in Cost of Goods Sold year to year? c. Relative to the percentage in Sales, would you say the percentage change on Cost of Goods Sold was favorable or unfavorable? d. Is this an example of horizontal or vertical analysis?arrow_forwardPedee Companys inventory turnover in days is 80 days. Which of the following actions could help to improve that ratio? a. Increase the sales price. b. Increase manufacturing costs. c. Reduce the cost of goods sold. d. Reduce average inventory. e. All of these.arrow_forwardIf a company has three lots of products for sale, purchase 1 (earliest) for $17, purchase 2 (middle) for $15, purchase 3 (latest) for $12, which of the following statements is true? A. This is an inflationary cost pattern. B. This is a deflationary cost pattern. C. The next purchase will cost less than $12. D. None of these statements can be verified.arrow_forward
- Questions: 1. What would be the amount of decrease in gross profit due to the change in selling price assuming the selling prices were 10% lower during 2020? 2. What would be the amount of change in gross profit assuming the quantity sold increases by 5% from 2019 to 2020? 3. What would be the percentage changes in cost price assuming the quantity sold increases by 5% from the base year to 2020?arrow_forwardPlease help me to solve this questionarrow_forwardWilliams & Sons last year reported sales of $15 million, cost of goods sold (COGS) of $12 million, and an inventory turnover ratio of 2. The company is now adopting a new inventory system. If the new system is able to reduce the firm's inventory level and increase the firm's inventory turnover ratio to 6 while maintaining the same level of sales and COGS, how much cash will be freed up? Do not round intermediate calculations. Enter your answer in dollars. For example, an answer of $1.23 million should be entered as 1,230,000,000. Round your answer to the nearest dollar. $arrow_forward
- Check my work mode : This shows what is correct or incorrect for the work you have completed so far, It does not indicate comple A firm is considering several policy changes to increase sales. It will increase the variety of goods it keeps in inventory, but this will increase inventory by $11,900. It will offer more liberal sales terms, but this will result in average receivables increasing by $68,800. These actions are expected to increase sales by $819,000 per year, and cost of goods will remain at 70% of sales. Because of the firm's increased purchases for its own production needs, average payables will increase by $36,900. What effect will these changes have on the firm's cash cycle? (Use 365 days in a year. Do not round your intermediate calculations. Round your answer to 2 decimal places.) X Answer is complete but not entirely correct. Change in cash cycle 44 55 X days Prev 7 of 8 Next > to search Ir Parrow_forwardThe analysis of Inventory Turnover Ratio is as follows: 2015: 4.34 2016: 3.15 2017: 4.76 2018: 2.94 2019: 5.32 a. What is the trend analysis for that Inventory Turnover Ratio and why it is increasing/decreasing?arrow_forwardhrl.3arrow_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 LearningManagerial Accounting: The Cornerstone of Busines...AccountingISBN:9781337115773Author:Maryanne M. Mowen, Don R. Hansen, Dan L. HeitgerPublisher:Cengage Learning
- Principles of Accounting Volume 1AccountingISBN:9781947172685Author:OpenStaxPublisher:OpenStax College
Intermediate Financial Management (MindTap Course...
Finance
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Cengage Learning
Managerial Accounting: The Cornerstone of Busines...
Accounting
ISBN:9781337115773
Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Publisher:Cengage Learning
Principles of Accounting Volume 1
Accounting
ISBN:9781947172685
Author:OpenStax
Publisher:OpenStax College