Attached is the assignment I need to get done. Please let me know should you have any questions.

1.)Answer the following questions regarding a firm's cash cycles: a. What is the difference between a firm's cash cycle and its operating cycle? b. How will a firm's cash cycle be affected if a firm increases its inventory, all else being equal? c. How will a firm's cash cycle be affected if a firm begins to take the discounts offered by its suppliers, all else being equal? a. What is the difference between a firm's cash cycle and its operating cycle? The differences between a firm's cash cycle and its operating cycle are: o A.If a firm were to pay cash for its inventory, rather than buying the inventory on credit, the cash cycle and the operating cycle of the firm would be identical. In most cases, however, firms buy their inventory on credit, so the cash cycle is longer than the operating cycle of the firm. o B. The cash cycle is calculated as the average number of days between the purchase of the initial inventory and the sale of the end product plus the average number of days it takes the firm's customers to pay cash for the inventory they purchase minus the average number of days the firm takes to pay its suppliers for the inventory. o C. A firm's operating cycle is the average length of time between when a firm purchases its inventory and when the firm receives cash from the sale of the inventory. o D. A firm's cash cycle is the average length of time from when a firm pays cash for its inventory to when it receives cash from the sale of that inventory (or the end product that the firm produced with the inventory). o E. A firm's operating cycle is calculated as the average number of days between the purchase of the initial inventory and the sale of the end product plus the average number of days it takes the firm's customers to pay for the inventory they purchase. o F. If a firm were to pay cash for its inventory, rather than buying the inventory on credit, the cash cycle and the operating cycle of the firm would be identical. In most cases, however, firms buy their inventory on credit, so the cash cycle is shorter than the operating cycle of the firm. 2.) The Greek Connection had sales of $28.9 million and a cost of goods sold of $11.6 million in 2015. A simplified balance sheet for the firm appears below: THE GREEK CONNECTION Balance Sheet as of December 31, 2015 (thousands of dollars) Assets Liabilities and Equity Cash 2,282 Accounts receivable 3,541 Note Payable Accounts payable 1,000 Inventory 1,406 Accurals 1,220 Total current assets 7,229 Total current liabilities $3,958 Net plant, property, and equipment 8,500 Long Term Debts 3,000 Total assets 15,729 Total Liabilities 6,958 Common equity $1,738 8,771 Total liabilities and equity 15,729 a. Calculate The Greek Connection's net working capital in 2015. b. Calculate the cash conversion cycle of The Greek Connection in 2015. c. The industry average accounts receivable days is 30 days. What would the cash conversion cycle for The Greek Connection have been in 2015 had it matched the industry average for accounts receivable days? 3.) Assume the credit terms offered to your firm by your suppliers are 2.7/6, Net 30. Calculate the cost of the trade credit if your firm does not take the discount and pays on day 30. 4.) Your supplier offers terms of 1.2/10, Net 45. What is the effective annual cost of trade credit if you choose to forgo the discount and pay on day 45? 5.) The Fast Reader Company supplies bulletin board services to numerous hotel chains nationwide. The owner of the firm is investigating the benefit of employing a billing firm to do her billing and collections. Because the billing firm specializes in these services, collection float will be reduced by 16 days. Average daily collections are $1,450, and the owner can earn 9% annually (expressed as an APR with monthly compounding) on her investments. If the billing firm charges $375 per month, should the owner employ the billing firm? The benefits are $ 6.) Sailboats Etc. is a retail company specializing in sailboats and other sailing-related equipment. The table shown here, contains financial forecasts as well as current (month 0) working capital levels. During which month is the firm's change in net working capital the greatest? When does it have surplus cash? 1 0 Net Income 2 3 4 5 6 $ $ $ $ $ 10.18$10.1 11.76$11.7 15.11$15.1 25.02$25.0 29.58$29.5 8 6 1 2 8 2.012.01 3.023.02 3.063.06 4.044.04 4.954.95 1.151.15 0.000.00 0.000.00 1.171.17 0.000.00 $ 17.85$17.8 5 3.943.94 0.000.00 Depreciation Capital Expenditure s Levels of Working Capital Accounts $ $ 2.97$2.97 $ 4.07$4.07 $ 5.02$5.02 $ 7.02$7.02 $ $ 6.07$6.07 Receivable 2.05$2.0 10.01$10.0 5 1 Inventory 3.093.09 2.062.06 3.963.96 4.984.98 5.025.02 4.064.06 1.921.92 Accounts 1.971.97 1.971.97 1.971.97 1.971.97 1.971.97 Payable , We calculate the changes in net working capital for the firm:(Round to two decimal places.) 0 Change in accounts receivable Change in inventory Change in accounts payable Change in net working capital 1 $ $ $ $ 7.) Quarterly working capital levels for your firm for the next year are included in the following table. What are the permanent working capital needs of your company? What are the temporary needs? Quarter 1 2 3 4 (000 ) Cash $100 $100 $100 $100 Account Receivable 203 95 100 605 Inventory 205 496 896 46 Accounts Payable 102 101 96 96 8.) Hand-to-Mouth (H2M) is currently cash-constrained, and must make a decision about whether to delay paying one of its suppliers, or take out a loan. They owe the supplier $10,000 with terms of 1.8/10 Net 40, so the supplier will give them a 1.8% discount if they pay by today (when the discount period expires). Alternatively, they can pay the full $10,000 in one month when the invoice is due. H2M is considering three options: Alternative A: Forgo the discount on its trade credit agreement, wait and pay the full $10,000 in one month. Alternative B: Borrow the money needed to pay its supplier today from Bank A, which has offered a onemonth loan at an APR of 12%. The bank will require a (no-interest) compensating balance of 4.7% of the face value of the loan and will charge a $105 loan origination fee. Because H2M has no cash, it will need to borrow the funds to cover these additional amounts as well. Alternative C: Borrow the money needed to pay its supplier today from Bank B, which has offered a onemonth loan at an APR of 14.9%. The loan has a 1.3% loan origination fee, which again H2M will need to borrow to cover. 9.) Discuss the three different arrangements under which a firm may use inventory to secure a loan. (Select from the drop-down menus.) ( Trust Receipts arrangement, warehouse arrangementand Floating lie ) The three different methods under which inventory is used as collateral for a loan are floating liens, trust receipts, and warehouse arrangements. With a _______________(also called a "general lien" or a "blanket lien"), all of the borrower's inventory serves as collateral for a loan. The value of the collateral declines as the firm sells its inventory. In times of financial distress, a firm may decide to sell its inventory without making payments on the loan and may not have enough money to replenish the inventory it has sold. The loan is then under-collateralized. This is the riskiest arrangement from the lender's standpoint, and the loan will carry a higher interest rate than if one of the other two methods is used. Additionally, the lender will lend a much smaller percentage of the inventory value under this arrangement. In _________________(or floor planning arrangement), specific inventory items are identified as collateral for the loan. As the specified inventory is sold, the firm uses the cash received to repay the loan. The lender will send someone to the borrower's premises periodically to ensure that none of the specified inventory has been sold without a repayment made. In a ____________________the inventory serving as collateral is stored in a warehouse. One type of warehouse is a public warehouse, which is a business that exists for the sole purpose of tracking the flow of the inventory. The inventory is delivered to the public warehouse by the borrowing firm, and the lender extends a loan based on the value of that inventory. When the borrowing firm needs the inventory to sell, it must return to the warehouse to retrieve it after receiving permission from the lender to do so. This arrangement is the least risky from the standpoint of the lender since it allows the lender to maintain the tightest control over the inventory, but it is only feasible for some types of inventory. This method would not be usable for inventory that is subject to spoilage or that is bulky and difficult to transport. In this latter case, a field warehouse might be a good alternative. A field warehouse is established on the borrower's premises, but it is separated from the borrower's main plant. It is operated by a third party. This type of arrangement is more convenient for the borrower, but it still gives the lender the added security of having the inventory that serves as collateral tracked by a third party. Question 1 a. What is the difference between afirm's cash cycle and its operatingcycle? The cash cycle is the time it take between the payment of cash for inventory and the receipt of cash for the finished goods from that inventory. The operating cycle is the amount of time between the purchase of the purchase of the inventory and the receipt of cash from that inventory. b. How will afirm's cash cycle be affected if a firm increases itsinventory, all else being equal? Firm's cash cycle will increase when it increases its inventory, as its inventory days will increase c. How will afirm's cash cycle be affected if a firm begins to take the discounts offered by its suppliers, all else beingequal? A firm`s cycle will increase when it accepts the discounts given by supplies because the payables days will decrease Question 2. a. Calculate The Greek Connection's net working capital in 2015 = total current asset- total asset liability $7229-$3958 =$3271 b. Calculate the cash conversion cycle of The Greek Connection in 2015. CCC=days inventory outstanding + days sale outstanding - days payable outstanding CCC= 1406/(11600/365) + 3541/(28900/365) - 1738/(11600/365) CCC=44.24+ 44.72-54.69 CCC=34.27 days c. The industry average accounts receivable days is 30 days. What would the cash conversion cycle for The Greek Connection have been in 2015 had it matched the industry average for accounts receivable days? CCC=days inventory outstanding + days sale outstanding - days payable outstanding CCC=44.24+30-54.96 CCC=19.28 days Question 3. Assume the credit terms offered to your firm by your suppliers are 2.7/6, Net 30. Calculate the cost of the trade credit if your firm does not take the discount and pays on day 30. 30net -6day=24 100-2.7=97.3 2.7/97.3*365/24 0.4220 =42.20% Question 4. Your supplier offers terms of 1.2/10, Net 45. What is the effective annual cost of trade credit if you choose to forgo the discount and pay on day 45? 45net -10day=35 100-1.2=98.8 1.2/98.8*365/35 0.1267 =12.67% Question 5. The Fast Reader Company supplies bulletin board services to numerous hotel chains nationwide. The owner of the firm is investigating the benefit of employing a billing firm to do her billing and collections. Because the billing firm specializes in theseservices, collection float will be reduced by 16 days. Average daily collections are $1,450, and the owner can earn 9% annually(expressed as an APR with monthlycompounding) on her investments. If the billing firm charges $375 permonth, should the owner employ the billingfirm? Average daily collection are $1450 Collection float reduce by 16days Since the collection has been reduced by 16 days fast reader will have an additional (1450*16) =$23200 At an annual rate of 9% Monthly discount rate= (1.09^ (1/12)-1=0.007207 =0.7207 So the present value of $375 per month=375/0.007207= 52030.41 The cost $52030.41exceed the benefit $23200, and the Fast Reader should not the billing firm Question 6. Changes in working capital Account receivable Inventory Account payable Changes in working capital 1 0.92 2 1.1 3 0.95 4 2 5 2.99 6 (3.94) (0.13) 0 1.9 0 1.02 0 0.22 0 (0.96) 0 (2.14) 0 0.79 3 1.97 2.22 2.03 (6.08) Question 7. Permanent working capital Working capital = cash + AR + Inventory - AP 0000 1 Cash $100 Accounts 203 receivable Inventory 205 Accounts 102 payable Working capital 406 Permanent working capital 2 $100 95 3 $100 100 4 $100 605 496 101 896 96 46 96 590 1000 655 Working capital = cash + AR + Inventory - AP Permanent working capital equals the minimum level of working capital which occurs at quarter 1 in the amount of $406million Temporary working capital = working capital - permanent working capital=$406-$406=$0million Question 8. Alternative B: Borrow the money needed to pay its supplier today from BankA, which has offered aone-month loan at an APR of 12%. The bank will require a(no-interest) compensating balance of 4.7% Of the face value of the loan and will charge a $105 loan origination fee. Because H2M has no cash, it will need to borrow the funds to cover these additional amounts as well Question 9. Floating lien With floating liens (also called a 'general lien or blanket lien) all the borrowers` inventory serves as a collateral for a loan. The value of the collateral declines as the firms sell its inventory. In times of financial distress the firm may decide to sell its inventory without making payment on the loan and may not have enough money to replenish the inventory it has sold. The loan is thenunder-collateralized. This is the riskiest arrangement from thelender's standpoint, and the loan will carry a higher interest rate than if one of the other two methods is used. Additionally, the lender will lend a much smaller percentage of the inventory value under this arrangement. Trust receipts In trust receipt (or floor planningarrangement), specific inventory items are identified as collateral for the loan. As the specified inventory is sold, the firm uses the cash received to repay the loan. The lender will send someone to theborrower's premises periodically to ensure that none of the specified inventory has been sold without a repayment made Warehouse arrangement In warehouse arrangement the inventory serving as collateral is stored in a warehouse. One type of warehouse is a publicwarehouse, which is a business that exists for the sole purpose of tracking the flow of the inventory. The inventory is delivered to the public warehouse by the borrowingfirm, and the lender extends a loan based on the value of that inventory. When the borrowing firm needs the inventory tosell, it must return to the warehouse to retrieve it after receiving permission from the lender to do so. This arrangement is the least risky from the standpoint of the lender since it allows the lender to maintain the tightest control over the inventory, but it is only feasible for some types of inventory. This method would not be usable for inventory that is subject to spoilage or that is bulky and difficult to transport. In this latter case, a field warehouse might be a good alternative. A field warehouse is established on the borrower's premises, but it is separated from theborrower's main plant. It is operated by a third party. This type of arrangement is more convenient for the borrower, but it still gives the lender the added security of having the inventory that serves as collateral tracked by a third party Question 1 a. What is the difference between afirm's cash cycle and its operatingcycle? The cash cycle is the time it take between the payment of cash for inventory and the receipt of cash for the finished goods from that inventory. The operating cycle is the amount of time between the purchase of the purchase of the inventory and the receipt of cash from that inventory. b. How will afirm's cash cycle be affected if a firm increases itsinventory, all else being equal? Firm's cash cycle will increase when it increases its inventory, as its inventory days will increase c. How will afirm's cash cycle be affected if a firm begins to take the discounts offered by its suppliers, all else beingequal? A firm`s cycle will increase when it accepts the discounts given by supplies because the payables days will decrease Question 2. a. Calculate The Greek Connection's net working capital in 2015 = total current asset- total asset liability $7229-$3958 =$3271 b. Calculate the cash conversion cycle of The Greek Connection in 2015. CCC=days inventory outstanding + days sale outstanding - days payable outstanding CCC= 1406/(11600/365) + 3541/(28900/365) - 1738/(11600/365) CCC=44.24+ 44.72-54.69 CCC=34.27 days c. The industry average accounts receivable days is 30 days. What would the cash conversion cycle for The Greek Connection have been in 2015 had it matched the industry average for accounts receivable days? CCC=days inventory outstanding + days sale outstanding - days payable outstanding CCC=44.24+30-54.96 CCC=19.28 days Question 3. Assume the credit terms offered to your firm by your suppliers are 2.7/6, Net 30. Calculate the cost of the trade credit if your firm does not take the discount and pays on day 30. 30net -6day=24 100-2.7=97.3 2.7/97.3*365/24 0.4220 =42.20% Question 4. Your supplier offers terms of 1.2/10, Net 45. What is the effective annual cost of trade credit if you choose to forgo the discount and pay on day 45? 45net -10day=35 100-1.2=98.8 1.2/98.8*365/35 0.1267 =12.67% Question 5. The Fast Reader Company supplies bulletin board services to numerous hotel chains nationwide. The owner of the firm is investigating the benefit of employing a billing firm to do her billing and collections. Because the billing firm specializes in theseservices, collection float will be reduced by 16 days. Average daily collections are $1,450, and the owner can earn 9% annually(expressed as an APR with monthlycompounding) on her investments. If the billing firm charges $375 permonth, should the owner employ the billingfirm? Average daily collection are $1450 Collection float reduce by 16days Since the collection has been reduced by 16 days fast reader will have an additional (1450*16) =$23200 At an annual rate of 9% Monthly discount rate= (1.09^ (1/12)-1=0.007207 =0.7207 So the present value of $375 per month=375/0.007207= 52030.41 The cost $52030.41exceed the benefit $23200, and the Fast Reader should not the billing firm Question 6. Changes in working capital Account receivable Inventory Account payable Changes in working capital 1 0.92 2 1.1 3 0.95 4 2 5 2.99 6 (3.94) (0.13) 0 1.9 0 1.02 0 0.22 0 (0.96) 0 (2.14) 0 0.79 3 1.97 2.22 2.03 (6.08) Question 7. Permanent working capital Working capital = cash + AR + Inventory - AP 0000 1 Cash $100 Accounts 203 receivable Inventory 205 Accounts 102 payable Working capital 406 Permanent working capital 2 $100 95 3 $100 100 4 $100 605 496 101 896 96 46 96 590 1000 655 Working capital = cash + AR + Inventory - AP Permanent working capital equals the minimum level of working capital which occurs at quarter 1 in the amount of $406million Temporary working capital = working capital - permanent working capital=$406-$406=$0million Question 8. Alternative B: Borrow the money needed to pay its supplier today from BankA, which has offered aone-month loan at an APR of 12%. The bank will require a(no-interest) compensating balance of 4.7% Of the face value of the loan and will charge a $105 loan origination fee. Because H2M has no cash, it will need to borrow the funds to cover these additional amounts as well Question 9. Floating lien With floating liens (also called a 'general lien or blanket lien) all the borrowers` inventory serves as a collateral for a loan. The value of the collateral declines as the firms sell its inventory. In times of financial distress the firm may decide to sell its inventory without making payment on the loan and may not have enough money to replenish the inventory it has sold. The loan is thenunder-collateralized. This is the riskiest arrangement from thelender's standpoint, and the loan will carry a higher interest rate than if one of the other two methods is used. Additionally, the lender will lend a much smaller percentage of the inventory value under this arrangement. Trust receipts In trust receipt (or floor planningarrangement), specific inventory items are identified as collateral for the loan. As the specified inventory is sold, the firm uses the cash received to repay the loan. The lender will send someone to theborrower's premises periodically to ensure that none of the specified inventory has been sold without a repayment made Warehouse arrangement In warehouse arrangement the inventory serving as collateral is stored in a warehouse. One type of warehouse is a publicwarehouse, which is a business that exists for the sole purpose of tracking the flow of the inventory. The inventory is delivered to the public warehouse by the borrowingfirm, and the lender extends a loan based on the value of that inventory. When the borrowing firm needs the inventory tosell, it must return to the warehouse to retrieve it after receiving permission from the lender to do so. This arrangement is the least risky from the standpoint of the lender since it allows the lender to maintain the tightest control over the inventory, but it is only feasible for some types of inventory. This method would not be usable for inventory that is subject to spoilage or that is bulky and difficult to transport. In this latter case, a field warehouse might be a good alternative. A field warehouse is established on the borrower's premises, but it is separated from theborrower's main plant. It is operated by a third party. This type of arrangement is more convenient for the borrower, but it still gives the lender the added security of having the inventory that serves as collateral tracked by a third party Question 1 a. What is the difference between afirm's cash cycle and its operatingcycle? The cash cycle is the time it take between the payment of cash for inventory and the receipt of cash for the finished goods from that inventory. The operating cycle is the amount of time between the purchase of the purchase of the inventory and the receipt of cash from that inventory. b. How will afirm's cash cycle be affected if a firm increases itsinventory, all else being equal? Firm's cash cycle will increase when it increases its inventory, as its inventory days will increase c. How will afirm's cash cycle be affected if a firm begins to take the discounts offered by its suppliers, all else beingequal? A firm`s cycle will increase when it accepts the discounts given by supplies because the payables days will decrease Question 2. a. Calculate The Greek Connection's net working capital in 2015 = total current asset- total asset liability $7229-$3958 =$3271 b. Calculate the cash conversion cycle of The Greek Connection in 2015. CCC=days inventory outstanding + days sale outstanding - days payable outstanding CCC= 1406/(11600/365) + 3541/(28900/365) - 1738/(11600/365) CCC=44.24+ 44.72-54.69 CCC=34.27 days c. The industry average accounts receivable days is 30 days. What would the cash conversion cycle for The Greek Connection have been in 2015 had it matched the industry average for accounts receivable days? CCC=days inventory outstanding + days sale outstanding - days payable outstanding CCC=44.24+30-54.96 CCC=19.28 days Question 3. Assume the credit terms offered to your firm by your suppliers are 2.7/6, Net 30. Calculate the cost of the trade credit if your firm does not take the discount and pays on day 30. 30net -6day=24 100-2.7=97.3 2.7/97.3*365/24 0.4220 =42.20% Question 4. Your supplier offers terms of 1.2/10, Net 45. What is the effective annual cost of trade credit if you choose to forgo the discount and pay on day 45? 45net -10day=35 100-1.2=98.8 1.2/98.8*365/35 0.1267 =12.67% Question 5. The Fast Reader Company supplies bulletin board services to numerous hotel chains nationwide. The owner of the firm is investigating the benefit of employing a billing firm to do her billing and collections. Because the billing firm specializes in theseservices, collection float will be reduced by 16 days. Average daily collections are $1,450, and the owner can earn 9% annually(expressed as an APR with monthlycompounding) on her investments. If the billing firm charges $375 permonth, should the owner employ the billingfirm? Average daily collection are $1450 Collection float reduce by 16days Since the collection has been reduced by 16 days fast reader will have an additional (1450*16) =$23200 At an annual rate of 9% Monthly discount rate= (1.09^ (1/12)-1=0.007207 =0.7207 So the present value of $375 per month=375/0.007207= 52030.41 The cost $52030.41exceed the benefit $23200, and the Fast Reader should not the billing firm Question 6. Changes in working capital Account receivable Inventory Account payable Changes in working capital 1 0.92 2 1.1 3 0.95 4 2 5 2.99 6 (3.94) (0.13) 0 1.9 0 1.02 0 0.22 0 (0.96) 0 (2.14) 0 0.79 3 1.97 2.22 2.03 (6.08) Question 7. Permanent working capital Working capital = cash + AR + Inventory - AP 0000 1 Cash $100 Accounts 203 receivable Inventory 205 Accounts 102 payable Working capital 406 Permanent working capital 2 $100 95 3 $100 100 4 $100 605 496 101 896 96 46 96 590 1000 655 Working capital = cash + AR + Inventory - AP Permanent working capital equals the minimum level of working capital which occurs at quarter 1 in the amount of $406million Temporary working capital = working capital - permanent working capital=$406-$406=$0million Question 8. Alternative B: Borrow the money needed to pay its supplier today from BankA, which has offered aone-month loan at an APR of 12%. The bank will require a(no-interest) compensating balance of 4.7% Of the face value of the loan and will charge a $105 loan origination fee. Because H2M has no cash, it will need to borrow the funds to cover these additional amounts as well Question 9. Floating lien With floating liens (also called a 'general lien or blanket lien) all the borrowers` inventory serves as a collateral for a loan. The value of the collateral declines as the firms sell its inventory. In times of financial distress the firm may decide to sell its inventory without making payment on the loan and may not have enough money to replenish the inventory it has sold. The loan is thenunder-collateralized. This is the riskiest arrangement from thelender's standpoint, and the loan will carry a higher interest rate than if one of the other two methods is used. Additionally, the lender will lend a much smaller percentage of the inventory value under this arrangement. Trust receipts In trust receipt (or floor planningarrangement), specific inventory items are identified as collateral for the loan. As the specified inventory is sold, the firm uses the cash received to repay the loan. The lender will send someone to theborrower's premises periodically to ensure that none of the specified inventory has been sold without a repayment made Warehouse arrangement In warehouse arrangement the inventory serving as collateral is stored in a warehouse. One type of warehouse is a publicwarehouse, which is a business that exists for the sole purpose of tracking the flow of the inventory. The inventory is delivered to the public warehouse by the borrowingfirm, and the lender extends a loan based on the value of that inventory. When the borrowing firm needs the inventory tosell, it must return to the warehouse to retrieve it after receiving permission from the lender to do so. This arrangement is the least risky from the standpoint of the lender since it allows the lender to maintain the tightest control over the inventory, but it is only feasible for some types of inventory. This method would not be usable for inventory that is subject to spoilage or that is bulky and difficult to transport. In this latter case, a field warehouse might be a good alternative. A field warehouse is established on the borrower's premises, but it is separated from theborrower's main plant. It is operated by a third party. This type of arrangement is more convenient for the borrower, but it still gives the lender the added security of having the inventory that serves as collateral tracked by a third party