Task 5
Uploaded by
ScribdTranslationsTask 5
Uploaded by
ScribdTranslations1.
Camp Manufacturing completes its inventory turnover 8 times a year, it has a period
average payment period of 35 days and an average collection period of 60 days. The annual sales of the
the company's expenses amount to $3.5 million. Assume that there is no difference in the investment for
dollar of sales in inventory, accounts receivable, and accounts payable, and that the year has
365 days.
a) Calculate the operating cycle and the cash conversion cycle of the company.
b) Determine the daily operational cash expenses of the company. How much should it invest in
resources to support your cash conversion cycle?
c) If the company pays 14% for these resources, how much would its annual profits increase by?
favorably change your current cash conversion cycle in 20 days?
2.
Garrett Industries completes its inventory turnover 6 times a year, has an average period
of 45 days and an average payment period of 30 days. The company's annual sales are
of $3 million. Assume there is no difference in the investment per dollar of sales in
inventory, accounts receivable, and accounts payable, and that the year has 365 days.
a) Calculate the cash conversion cycle of the company, its cash operating expenses
diaries, and the amount of resources needed to sustain their conversion cycle of
cash.
b) Determine the cash conversion cycle of the company and its investment needs in
resources, if you make the following changes simultaneously.
Reduce the average inventory age by 5 days.
It speeds up the collection of accounts receivable by an average of 10 days.
Extend the average payment period by 10 days.
c) If the company pays 13% for its investment in resources, how much could it increase its
annual utilities as a result of the changes in section b)?
d) If the annual cost of obtaining the profits from item c) is $35,000, what measure
Would you recommend the company? Why?
I wouldn't recommend doing that since your earnings don't reach that, so it is advised.
that will store for their upcoming projects to be carried out.
3.
Dynabase Tool forecasted its total funding needs for the next year, which
shown in the following table.
a) Divide the funds that the company requires monthly into 1. a permanent component
and 2. a seasonal component, and calculate the monthly average of each of these
components.
b) Describe the long-term and short-term financing amount to meet the need.
total funds with: 1. an aggressive financing strategy and 2. a strategy of
conservative financing. Suppose that with the aggressive strategy, the long-term funds
Financial deadlines meet permanent needs, and short-term funds are used to finance.
seasonal needs.
c) If we assume that short-term funds cost 12% annually and that the cost of the
long-term funds are at 17% per year, use the averages obtained in section a) to
calculate the total cost of each of the strategies described in section b).
d) Comment on the balance between profitability and risk related to the aggressive strategy and the
related to the conservative strategy.
