Quiz 15 :
Managing Short- Term Assets
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Q26 Q26 Q26
On average, a firm sells $2,500,000 in merchandise a month.Its cost of goods sold equals 80 percent of sales, and it keeps inventory equal to one-half of its monthly cost of goods on hand at all times.If the firm analyzes its accounts using a 360-day year, what is the firm's inventory conversion period?
Q27 Q27 Q27
You have recently been hired to improve the performance of Multiplex Corporation which has been experiencing a severe cash shortage.As one part of your analysis, you want to determine the firm's cash conversion cycle.Using the following information and a 360-day year, what is your estimate of the firm's current cash conversion cycle? Current inventory = $120,000 Annual sales = $600,000 Accounts receivable = $160,000 Accounts payable = $25,000 Total annual purchases = $360,000 Purchases credit terms: net 30 days Receivables credit terms: net 50 days
Q28 Q28 Q28
Jordan Air Inc.has average inventory of $1,000,000.Its estimated annual sales are 15 million and the firm estimates its receivables collection period to be twice as long as its inventory conversion period.The firm pays its trade credit on time; its terms are net 30.The firm wants to decrease its cash conversion cycle by 10 days.It believes that it can reduce its average inventory to $900,000.Assume a 360-day year and that sales will not change.Cost of goods sold equal 80 percent of sales.By how much must the firm also reduce its accounts receivable to meet its goal of a 10- day reduction?