Question: Question 2 (Cash Conversion Cycle - Calculation) Simple Industries turns its inventory 8 times each year; its average collection period is 50 days, and its

Question 2 (Cash Conversion Cycle - Calculation) Simple Industries turns its

Question 2 (Cash Conversion Cycle - Calculation) Simple Industries turns its inventory 8 times each year; its average collection period is 50 days, and its average payment period is 35 days. The firm's annual operating cycle investment is $6M. a. Calculate the firm's CCC and its daily cash operating expenditure, and the amount of financing required to support its CCC. (CCC60days,$16,666,67,$1M) b. Find the firm's new CCC and financing amount if it makes the following changes simultaneously. Shortens the AAI by 4 days and Speeds the ACP by 6 days and Extends the APP by 5 days. (CCC45days,$0.75M) c. If the annual interest rate is 4%, by how much is its total savings from financing as a result of the changes in (b)? ($10,000) d. Simple Industries current grant credit terms to its customers. What are the possible effects on the firm if the credit terms are relaxed? You are to discuss the effects on the risks and returns on the firm, the activity ratios as well as the cash conversion cycle. (i.e. Sales \& Profits, Bad Debts, AR \& ACP, AAl, Risks, CCC, etc...)

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer

Step: 1 Unlock blur-text-image

Question Has Been Solved by an Expert!

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

Step: 2 Unlock

Step: 3 Unlock

Students Have Also Explored These Related Finance Questions!

G 2 P15-2 Changing cash conversion cycle The Furniture Corporation has an inventory turnover of 7, an average collection period of 45 days, and an average payment period of 30 days. Annual sales are...

ZYX is a wholesale distributor. The company's balance sheet as of November 30 is given below: ZYX Balance Sheet November 30, 2015 Assets Cash $91,000 Accounts receivable (net)* 305,800 Inventory...

changing cash conversion cycle camp manufacturing turns over its inventory 8 times each year, has an average payment period of 35 days, and has an average collection period of 60 days. the firms...

Can any one help me with this accounting problem? Thank you ZYX is a wholesale distributor. The company's balance sheet as of November 30 is given below: ZYX Balance Sheet November 30, 2015 Assets...

ZYX is a wholesale distributor. The company's balance sheet as of November 30 is given below: ZYX Balance Sheet November 30, 2015 Assets Cash $91,000 Accounts receivable (net)* 305,800 Inventory...

Multiple changes in cash conversion cycle Garrett Industries turns over its inventory 7 times each year; it has an average collection period of 46 days and an average payment period of 35 days. The...

Multiple changes in cash conversion cycle Garrett Industries tums over its inventory 7 times each year, it has an average collection period of 44 days and an average payment period of 27 days. The...

Score: 0 of 1 pt 1 of 8 (0 complete) HW Score: 0%, 0 of 8 p P15-3 (similar to) Multiple changes in cash conversion cycle Garrett Industries turns over its inventory 6 times each year, it has an...

Changing cash conversion cycle Camp Manufacturing turns over its inventory 5 times each year, has an average payment period of 30 days, and has an average collection period of 50 days. The firm has...

Create two linked lists. Your task is to swap the data of every second element of the link lists. Once you have done with that print the old link lists as well the new link lists. An illustration is...

Study the police brutality crimes using: https://www.bjs.gov/ After studying the statistics involved and defining the criminal justice system, write a proposal argument addressing needed reform Start...

Sandy divorced her husband last year what amount to Sandy not have to include as part of her taxable income a the child support payments that she receives on behalf of her 2 - year - old daughter be...

Questions Q1. Write a Python program to retrieve the first and last colors from the following list: color_list = ["red", "green", "white", "blue", "black") Q2. Given the following dictionary,...

What other filters might you include to satisfy the requirements of the auditor, financial accountant, or tax preparer from Part 1?

How does limiting the range of values improve the performance of your model?

Do you find that most of your identified procedures are manual or automatic?