Question: American Products is considering about managing cash efficiently. On the average, inventories have an age of 90 days, and accounts receivable are collected in 60

American Products is considering about managing cash efficiently. On the average, inventories have an age of 90 days, and accounts receivable are collected in 60 days. Accounts payable are paid approximately 30 days after they arise. The firm has annual sales of about $30 million. Assume there is no difference in the investment per dollar of sales I inventory, recievables, and payables; and 365-day year.

a. Calculate the firm’s operating cycle

b. Calculate the firm’s cash conversion cycle

c. Calculate the amount of resources needed to support the firm’s cash conversion cycle.

d. Discuss how management might be able to reduce the cash conversion cycle.

Step by Step Solution

★★★★★

3.51 Rating (174 Votes )

There are 3 Steps involved in it

1 Expert Approved Answer

Step: 1 Unlock

a Computation of Operating Cycle Operating cycle Inventory age Receivables age 90 60 150 days Hence ... View full answer

Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock

Step: 3 Unlock

Document Format (1 attachment)

68-B-A-F-S (3059).docx

120 KBs Word File

Students Have Also Explored These Related Accounting Questions!

Test - LOG 2060 Intermediate Systems Sustainment Management T07.E02 Describe DoD's Depot Maintenance Enterprise and How Core, 50-50, and Partnering Initiatives Question 30 of 31. In depot...

Accounts Payable Accounts Receivable Cash Inventory and Sales Revenue are not involved in the Other Accounts column in either the cash receipts or cash payments journal and are not involved in any...

Calculate the firms cash conversion cycle given annual sales are $660,000 and cost of goods represent 80% of sales. Assume a 365-day year.

An American firm has British pounddenominated accounts payable on its balance sheet. Managers believe the exchange rate of British pounds to U.S. dollars will depreciate before the accounts will be...

Cash conversion cycle American Products is concerned about managing cash efficiently. On the average, inventories have an age of 84 days, and accounts receivable are collected in 30 days. Accounts...

1. Cash conversion cycle American Products is concerned about managing cash efficiently. On the average, inventories have an age of 84 days, and accounts receivable are collected in 35 days. Accounts...

Can someone also explain how to do c? Cash conversion cycle American Products is concerned about managing cash efficiently. On the average, inventories have an age of 80 days, and accounts receivable...

hamile och de vacances Sport Cache Cash conversion cycle American Products is concerned about managing cash efficiently. On the average, inventories have an age of 85 days, and accounts receivable...

Cash conversion cycle American Products is concerned about managing cash efficiently. On the average, inventories have an age of 82 days, and accounts receivable are collected in 34 days. Accounts...

1. Cash conversion cycle American Products is concerned about managing cash efficiently. On the average, inventories have an age of 78 days, and accounts receivable are collected in 34 days. Accounts...

Cash conversion cycle American Products is concerned about managing cash efficiently. On the average, inventories have an age of 80 days, and accounts receivable are collected in 40 days. Accounts...

Find fy (x, y) for f(x, y) = 2xy + xy = y.

Show that Please show all steps of working. d /(2u) du S 0 sin(ux) dx = 0.

Evaluate each of the following trigonometric expressions. Identify the order of the values from smallest to largest. Record this order by listing the number of the smallest result, then the second...

Read the case study Behavioral Genetics Explain gene-environment interaction and correlation, and active rGE and passive rGE Explain evolutionary psychology and how they explain the human behavior...

Write a paper on Psychology Theories vs. School violence

As discussed in the textbook, large accounting firms and other professional firms operate as limited liability partnerships (LLPs). Compare and contrast the advantages and disadvantages of a LLP form...

10. (a) Solve the differential equation dy 2- %3D +4 dx given that y =1 when x 1. (b) A particle moving in a straight line experiences a retardation of 0-2v3 m s2, where v is the speed of the...

Write a short note on an unpaid sellers lien. (Ref. Para-13.23)

Stan Conner and Mark Stein were discussing the presentation format of the statement of cash flows of Bombeck Co. At the bottom of Bombecks statement of cash flows was a separate section entitled...

During 2010, Simms Company redeemed $2,000,000 of bonds payable for $1,880,000 cash. Indicate how this transaction would be reported on a statement of cash flows, if at all.

What are some of the arguments in favor of using the indirect (reconciliation) method as opposed to the direct method for reporting a statement of cash flows?

Problem #9 (Kozak Problem 8.2.6) In 2008, there were 507 children in Arizona out of 32,601 who were diagnosed with Autism Spectrum Disorder (ASD) ("Autism and developmental," 2008). Find the...

The balance sheet and income statement shown below are for Gibson Inc. Note that the firm has no amortization charges, it does not lease any assets, none of its debt must be retired during the next 5...

Which of the following is equivalent to F 3 ?