EBK FUNDAMENTALS OF CORPORATE FINANCE
9th Edition
ISBN: 9781260049237
Author: BREALEY
Publisher: MCGRAW HILL BOOK COMPANY
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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.
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Students 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)
Happy Valley Homecare Suppliers, Incorporated (HVHS), had $11.7 million in sales in 2015. Its cost of goods sold was $4.68 million, and its average inventory balance was $1.84 million.
a. Calculate the average number of days inventory outstanding ratios for HVHS.
b. The average number of inventory days in the industry is 73 days. By how much must HVHS reduce its investment in inventory to improve its inventory days to meet the industry?
(Hint: Use a 365-day year.)
a. Calculate the number of days inventory outstanding ratios for HVHS.
The number of inventory days outstanding is
days. (Round to two demical places.)
b. The average number of inventory days in the industry is 73 days. By how much must HVHS reduce its investment in inventory to improve its inventory days to meet the industry?
To match the industry average number of inventory days, HVHS would reduce its inventory by $ million. (Round to three decimal place.)
Chapter 20 Solutions
EBK FUNDAMENTALS OF CORPORATE FINANCE
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
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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_forwardHappy Valley Homecare Suppliers, Incorporated (HVHS), had $13.6 million in sales in 2010. Its cost of goods sold was $5.44 million, and its average inventory balance was $1.67 million. a. Calculate the average number of days inventory outstanding ratios for HVHS. b. The average number of inventory days in the industry is 73 days. By how muchmust HVHS reduce its investment in inventory to improve its inventory days to meet the industry? (Hint: Use a 365-day year.)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_forward
- Inventory 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_forwardSmith 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_forwardIn 2013, Macy’s reported cost of goods sold of $16.5 billion, ending inventory for 2013 of$5.3 billion, and ending inventory for the previous year (2012) of $5.1 billion.Required:If the cost of inventory purchases was $16.9 billion, what was the cost of shrinkage during 2013?arrow_forward
- If prices are rising and a company is using LIFO, large purchases of inventory near the end of the year will: O increase income taxes paid. A O decrease income taxes paid. not change the amount of income taxes paid. either increase or decrease income taxes paid based on the sales price of the inventory. O There is not enough information to answer the question.arrow_forwardComment on the company with the shorter Days Inventory Outstanding. Should they maintain this efficiency, or should they slow down? Give advantages and disadvantages for both scenarios.arrow_forwardPlease solve, will upvote if correct !arrow_forward
- Pedee 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_forwardQuestions: 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_forward
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