A) ABC Inc. has $50,000 in average inventory, $60,000 in average receivables, and $101,000 in average...
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A) ABC Inc. has $50,000 in average inventory, $60,000 in average receivables, and $101,000 in average payables. Last year's annual sale was $700,000 with a gross profit margin of 25%. Calculate ABC's cash cycle and briefly explain your result. B) DEF Inc. is currently paying its suppliers on time but faces a liquidity crunch and must decide between borrowing from a bank at an annual rate of 12% and stretching its payables for one quarter beyond the discount period. If it stretches the payables, it will forgo a 2% discount for timely payment. Which alternative would you suggest (based on the cost only)? A) ABC Inc. has $50,000 in average inventory, $60,000 in average receivables, and $101,000 in average payables. Last year's annual sale was $700,000 with a gross profit margin of 25%. Calculate ABC's cash cycle and briefly explain your result. B) DEF Inc. is currently paying its suppliers on time but faces a liquidity crunch and must decide between borrowing from a bank at an annual rate of 12% and stretching its payables for one quarter beyond the discount period. If it stretches the payables, it will forgo a 2% discount for timely payment. Which alternative would you suggest (based on the cost only)?
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Answer rating: 100% (QA)
A To calculate ABC Incs cash cycle well use the formula Cash Cycle Inventory Conversion Period Receivables Collection Period Payables Deferral Period ... View the full answer
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