The impact of each transaction on cash cycle. Cash cycle is the overall circulation or cycle of cash commences from the payment of raw materials and ends with receipt of cash on goods sold. Cash cycle = [ Inventory holding period + Average collection period − Average payment period ]

Question

Want to see the full answer?

Answer 1

Question

Chapter 29, Problem 2PS

Summary Introduction

To determine: The impact of each transaction on cash cycle.

Cash cycle is the overall circulation or cycle of cash commences from the payment of raw materials and ends with receipt of cash on goods sold.

Cash cycle = [Inventory holding period+Average collection period− Average payment period]

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Students have asked these similar questions

What should a company do to improve its accounts receivable turnover rate? increase its sales force give customers credit terms of 2/10, n/30, rather than 1/10, n/30 lower its selling prices reduce the number of employees working in the credit department

8) Another metric of operational efficiency that your book also talks about is Days' Sales in Receivables. What does it mean when a firm's Days' Sales in Receivable is decreasing. That: The efficiency of Receivable Department is moving in the wrong direction. The quality of the firm's product has lost its shine. The winter days have slowed down the energy of the firm's sale associates. The efficiency of the firm's receivable collection is moving in the right direction. None of the above. The winter days have slowed down the the energy of the firm's sales associates The efficiency of the firm's receivable collection is moving in the right direction. None of the above

A company with annual sales of $22,000,000 is considering changing its payment terms from net 40 to net 30 to encourage customers to pay more promptly. The company forecasts that customers would respond by paying on day 32 rather than day 44 as at present (assume a 360 day year) but would decrease their purchases by $400,000 per year. The company also forecasts that its idle cash balance would decrease by $80,000 and administrative costs would be reduced by $30,000 per year. The company's variable costs average 62% of sales, it is in the 35% marginal tax bracket, and it has an 8% cost of capital. Part A: Calculate the incremental cash flows from accepting this proposal, and organize your cash flows into a cash flow spreadsheet. Part B: Calculate the proposal's NPV, IRR, and NAB. Part C: Should the company shorten its payment terms?

Answer 2

Question

Chapter 29, Problem 2PS

Summary Introduction

To determine: The impact of each transaction on cash cycle.

Cash cycle is the overall circulation or cycle of cash commences from the payment of raw materials and ends with receipt of cash on goods sold.

Cash cycle = [Inventory holding period+Average collection period− Average payment period]

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Answer 3

Question

Chapter 29, Problem 2PS

Summary Introduction

To determine: The impact of each transaction on cash cycle.

Cash cycle is the overall circulation or cycle of cash commences from the payment of raw materials and ends with receipt of cash on goods sold.

Cash cycle = [Inventory holding period+Average collection period− Average payment period]

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Answer 4

Question

Chapter 29, Problem 2PS

Summary Introduction

To determine: The impact of each transaction on cash cycle.

Cash cycle is the overall circulation or cycle of cash commences from the payment of raw materials and ends with receipt of cash on goods sold.

Cash cycle = [Inventory holding period+Average collection period− Average payment period]

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Answer 5

Chapter 29, Problem 2PS

Summary Introduction

To determine: The impact of each transaction on cash cycle.

Cash cycle is the overall circulation or cycle of cash commences from the payment of raw materials and ends with receipt of cash on goods sold.

Cash cycle = [Inventory holding period+Average collection period− Average payment period]

Answer 6

Chapter 29, Problem 2PS

Summary Introduction

To determine: The impact of each transaction on cash cycle.

Cash cycle is the overall circulation or cycle of cash commences from the payment of raw materials and ends with receipt of cash on goods sold.

Cash cycle = [Inventory holding period+Average collection period− Average payment period]

Answer 7

Chapter 29, Problem 2PS

Summary Introduction

To determine: The impact of each transaction on cash cycle.

Cash cycle is the overall circulation or cycle of cash commences from the payment of raw materials and ends with receipt of cash on goods sold.

Cash cycle = [Inventory holding period+Average collection period− Average payment period]

Answer 8

Expert Solution & Answer

Answer 9

Expert Solution & Answer

Answer 10

Want to see the full answer?

Check out a sample textbook solution

See solution

Answer 11

Ch. 29 - Prob. 1PS Ch. 29 - Prob. 2PS Ch. 29 - Sources and uses of cash and working capital...Ch. 29 - Sources and uses of cash State whether each of the...Ch. 29 - Prob. 5PS Ch. 29 - Forecasts of payables Dynamic Futon forecasts the...Ch. 29 - Prob. 8PS Ch. 29 - Prob. 9PS Ch. 29 - Prob. 10PS Ch. 29 - Prob. 11PS

The impact of each transaction on cash cycle. Cash cycle is the overall circulation or cycle of cash commences from the payment of raw materials and ends with receipt of cash on goods sold. Cash cycle = [ Inventory holding period + Average collection period − Average payment period ]

Solution Summary: The author explains the impact of each transaction on cash cycle. Decline in inventory turnover will increase the inventory period, decrease in accounts receivables period will get reduce by increase in discount.

To determine: The impact of each transaction on cash cycle.

Cash cycle is the overall circulation or cycle of cash commences from the payment of raw materials and ends with receipt of cash on goods sold.

Cash cycle = [Inventory holding period+Average collection period− Average payment period]

Want to see the full answer?

Chapter 29 Solutions

The impact of each transaction on cash cycle. Cash cycle is the overall circulation or cycle of cash commences from the payment of raw materials and ends with receipt of cash on goods sold. Cash cycle = [ Inventory holding period + Average collection period − Average payment period ]

Solution Summary: The author explains the impact of each transaction on cash cycle. Decline in inventory turnover will increase the inventory period, decrease in accounts receivables period will get reduce by increase in discount.

To determine: The impact of each transaction on cash cycle. Cash cycle is the overall circulation or cycle of cash commences from the payment of raw materials and ends with receipt of cash on goods sold. Cash cycle = [Inventory holding period+Average collection period− Average payment period]

Want to see the full answer?

Chapter 29 Solutions

To determine: The impact of each transaction on cash cycle.

Cash cycle is the overall circulation or cycle of cash commences from the payment of raw materials and ends with receipt of cash on goods sold.

Cash cycle = [Inventory holding period+Average collection period− Average payment period]