1. Given the information below evaluate the working capital effectiveness of company A based on its...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
1. Given the information below evaluate the working capital effectiveness of company A based on its operating and cash conversion cycles as compared to the working capital effectiveness of its peer company A. (Note: Compare the liquidity and liquidity needs for Company A and Company B for FY2). Cash and cash equivalents Inventory Receivables Accounts payable Revenues Cost of goods sold Current ratio Debt/Assets Turnover of cash & securities DSO (days) Inventory turnover Fixed Assets. turnover Total Assets turnover Company A (Tshs Mill) Company B (Tshs Mill) FY2 FYI FY2 200 110 200 500 450 900 600 625 1,000 400 350 600 Profit margin ROE 3,000 2,500 950 750 SKL 1.75x 58.76% 16.67x 45.63 4.82x 11.35x 2.08x 2.07% 10.45% 6,000 5,200 2. Consider the following information for the SKL company and evaluate company's working capital policy (relative to the industry). Is SKL conservative/aggressive or just inefficient? Industrial Average 2,25x 50.00% 22.22x 32.00 7.00x 12.00x 3.00x 3.50% 21.00% FYI 300 900 1,100 825 6,000 5.050 3. KSC Ltd has customers in Mwanza that remit about 1,000 cheques a year. The average cheque is for Tshs 10 million. Lake Zone cheques currently take an average of four days from the time they are mailed to clear into KSC's Dar es Salaam account. For a fee of Tshs 8 million a year plus Tshs 5,000 per cheque a Mwanza based bank has offered KSC an arrangement that is expected to reduce the clearing cheque time to one day. Is the bank's proposal a good deal for KSC if its cost of capital is 20%? 1. Given the information below evaluate the working capital effectiveness of company A based on its operating and cash conversion cycles as compared to the working capital effectiveness of its peer company A. (Note: Compare the liquidity and liquidity needs for Company A and Company B for FY2). Cash and cash equivalents Inventory Receivables Accounts payable Revenues Cost of goods sold Current ratio Debt/Assets Turnover of cash & securities DSO (days) Inventory turnover Fixed Assets. turnover Total Assets turnover Company A (Tshs Mill) Company B (Tshs Mill) FY2 FYI FY2 200 110 200 500 450 900 600 625 1,000 400 350 600 Profit margin ROE 3,000 2,500 950 750 SKL 1.75x 58.76% 16.67x 45.63 4.82x 11.35x 2.08x 2.07% 10.45% 6,000 5,200 2. Consider the following information for the SKL company and evaluate company's working capital policy (relative to the industry). Is SKL conservative/aggressive or just inefficient? Industrial Average 2,25x 50.00% 22.22x 32.00 7.00x 12.00x 3.00x 3.50% 21.00% FYI 300 900 1,100 825 6,000 5.050 3. KSC Ltd has customers in Mwanza that remit about 1,000 cheques a year. The average cheque is for Tshs 10 million. Lake Zone cheques currently take an average of four days from the time they are mailed to clear into KSC's Dar es Salaam account. For a fee of Tshs 8 million a year plus Tshs 5,000 per cheque a Mwanza based bank has offered KSC an arrangement that is expected to reduce the clearing cheque time to one day. Is the bank's proposal a good deal for KSC if its cost of capital is 20%?
Expert Answer:
Answer rating: 100% (QA)
1 2 Working capital policy of SKL is inefficient Industry current ratio is 225 whereas SKL ratio is 175 lower than industry average Turnover of cash s... View the full answer
Related Book For
Discovering Advanced Algebra An Investigative Approach
ISBN: 978-1559539845
1st edition
Authors: Jerald Murdock, Ellen Kamischke, Eric Kamischke
Posted Date:
Students also viewed these accounting questions
-
Answer each geometric probability problem. a. What is the probability that a randomly plotted point will land in the shaded region pictured at right? b. One thousand points are randomly plotted in...
-
What is the probability that the shopper in Example 2 will be in the supermarket between 33 and 60 minutes? a. Sketch a graph. b. Find the z-scores that correspond to 33 minutes and 60 minutes. c....
-
What is the probability that there are exactly two girls in a family with four children? Assume that girls and boys are equally likely.
-
Solve the inequalities in Problems 4150. 7-5A < 2A + 7
-
First Capital Realty, a Canadian company, reported under Canadian GAAP in 2010 and under IFRS in 2011. Instructions Access the financial statements for First Capital Realty for the years ended...
-
Find p and p if n = 217 and p = 0.455.
-
Classify each of the following as: Trading security (T) Available-for-sale security (A) Held-to-maturity security (H) None of the above (N) 1. A bond that management plans on owning until it is...
-
Orlando Auto Accessories produces pickup truck bumpers that it sells on a wholesale basis to new car retailers. The average bumper sales price is $160. Normal annual sales volume is 300,000 units,...
-
1.A company is considering the following additional capital structure: -10%, 10-year term, P1,000 par bond is currently selling to yield 12%.Total number of bonds to be issuedis 2,000. Flotation cost...
-
Determine the force in members GF, CF, and CD of the roof truss and indicate if the members are in tension or compression. 1.5 kN 1.70 m 2 kN 1.5 m 0,8 m G. -1 m- 2 m 2 m
-
Voltron Corp. granted a share appreciation right to one of their directors on January 1, 2021. This key employee is entitled to receive cash equal to the appreciation in share price over market value...
-
Accounting Question: Currency Exchange and Foreign Transactions Determine the monetary impact on financial statements of a U . K . company with sales in Poland, where the local currency depreciated...
-
Assume that the New York indirect quotation for the Canadian dollar is 1.1860 and the New York direct quote for the Australian dollar is 0.6024. The value of the Australian dollar in terms of...
-
How can I identify these? Flexible budget parameters How budgets assist managers Major objectives of budget process Treatment of fixed cost in a flexible budget Unfavorable production-volume variance
-
1 . The following information is provided for Wolf Company: Retained earnings $ 4 4 5 , 0 0 Preferred stock , 5 % , $ 5 0 about 1 0 0 , 0 0 0 Organization expense 2 , 5 0 0 Additional paid - in...
-
The total payroll of Waters Company for the month of October 2 0 0 7 was $ 3 6 0 , 0 0 0 . Taxable wages for Social Security ( 6 . 2 % ) were $ 2 7 0 , 0 0 0 Taxable wages for SUTA ( 1 % ) were $ 6 0...
-
A European gap call option with strike K, trigger K2 and maturity T on a stock S is an option of call type presenting a gap between the strike K (which determines the amount of the payoff in case the...
-
7 A 29-year-old, previously healthy man suddenly collapses at a party where legal and illicit drugs are being used. Enroute to the hospital, he requires resuscitation with defibrillation to establish...
-
What is wrong with this statement? ( )-inx sima cos (tan x) cos cos
-
In general, are polar equations functions? Explain your reasoning.
-
Follow these steps to solve Exercise 12a with geometry software. a. Open a new sketch. Define a coordinate system and plot three points, A, B, and C, that represent the locations of Ashton, Bradburg,...
-
Determine the slope at \(A\) and the maximum deflection. \(E I\) is constant. 20 kip.ft 6 ft A 12 ft- B 6 ft 20 kip-ft
-
Determine the slope of the 50 -mm-diameter A-36 steel shaft at the journal bearings at \(A\) and \(B\). The bearings exert only vertical reactions on the shaft. A 500 mm 800 mm 300 N 1200 mm D 300 N...
-
Determine the slope at \(A\) of the simply supported beam. EI is constant. B - d --
Study smarter with the SolutionInn App