Exercise number 1.

A company wants to manage its cash effectively. On average, accounts receivable

they become effective in 60 days, and inventories have an average age of 90 days. The debts for
Payments are settled almost 30 days after they are incurred. The company spends $30,000 annually.
at a constant rate. Assuming a year of 360 days:
a) Determine the cash cycle of the company
b) Estimate your cash turnover
c) Calculate the minimum operating cash balance that the company must maintain to comply with
your obligations.

cash cycle of the company rotation of effect in times per year minimum cash balance
120 3 $ 10,000.00

Exercise number 2.
A company has an inventory turnover of 12, an average collection period of 45.
days, and an average payment period of 40 days. The company spends $1,000,000 dollars a year.
Assuming a year of 360 days:
a) Determine the cash cycle of the company
b) Estimate your cash turnover
c) Calculate the minimum operating cash balance that the company must maintain to pay its
debts.

cash cycle of the company rotation of effect for times a year minimum cash balance
17 21.1764705882353 $ 47,222.22

Exercise number 3.
A company usually collects its accounts after 75 days. Its inventory has an average age
of 105 days, and their debts are paid 60 days after incurring them. What changes will occur in the
cash cycle and in the turnover of cash in each of the following circumstances? Assume a year of
360 days.
The average collection period changes to 60 days
b) The average inventory age changes to 90 days
c) The average payment period changes to 105 days
d) All the previous circumstances (from "a" to "c") occur simultaneously.

cash cycle of the company rotation of effectiveness times a year minimum cash balance
105 3.42857142857143 $ 291,666.67
change from 105 to 75 4.8 $ 13,333.33

Exercise number 4.
The company 'Noemí Eunice' buys and sells all its merchandise on credit. It is currently paying
credits every 45 days. Their inventories take an average of 60 days, and their customer credit policy is
of 90 days. The approximate operational disbursement is 35,000 dollars, and the cost of your money is
25%. The company wishes to take one of the following alternatives:
a) Change their supplier payment policies to 55 days
b) Accelerate inventories to 45 days
c) Increase your credit policies to 120 days
Would you accept any of the alternatives? Why?

cash cycle of the company rotation of effects times a year minimum cash balance
105 3.42857142857143 $ 291,666.67
change from 105 to 95 3.78947368421053 $ 263,888.89
change from 105 to 120 2.66666666666667 $ 375,000.00
Would you accept any of the alternatives? Why?

As a company, I would accept option A, as it has the least cash turnover per year and the
the turnover of effects is greater in the year.

Exercise number 5.
Hurkin Manufacturing Company settles its accounts payable on the tenth day after the
purchase. The average collection period is 30 days and the average inventory age is 40 days. The
The company currently spends around $18 million on investments for the operating cycle and evaluates a
plan that would delay the settlement of its accounts payable by 20 days. If the company pays 12% annually
Regarding your financing, what would be the annual savings you would achieve with this plan? Assume there is no
discount for early payment of commercial credit and that the year has 360 days.

CO=EPI+PPC
CO=40+30
CO=70
CCE=CO-PPP
CCE=70-10
60
1. OPERATING EXPENSES = $18,000,000/360 = $50,000
2. NEED FOR RESOURCE (OPERATING EXPENSES/CCE) = $50,000 * 60 = $3,000,000
3. ACTUAL = (RESOURCE NEED * ANNUAL PERCENTAGE): $3,000,000 * 12% = 360,000
4. PROPOSAL = 60-30=30*50,000=1,500,000*12%=180,000
5. THE ANNUAL SAVINGS WILL BE =360,000-180,000= 180,000
occurs simultaneously
75
increase to 55
95
increase to 120
135
Small Appliance currently has credit sales of $360 million per year and a period of
charged for 60 days. suppose that the price of Small's products is $60 per unit and
Variable costs are $55 per unit. The company is evaluating a change in accounts receivable.
which will result in a 20% increase in sales and an equivalent increase in
20% in the average collection period. No change is expected in doubtful debts.
charge, the opportunity cost of similar risk of the company, on its investment in accounts
to be charged, is 14%
a). Calculate the additional contribution to profits from the new sales that the company
will carry out if it makes the proposed change.
b) What marginal investment in accounts receivable will you obtain?
c) Calculate the cost of the marginal investment in accounts receivable
d) Should the company implement the proposed change?

a). Calculate the additional contribution to profits from the new sales that the company
will carry out or make the proposed change.
Número de unidades =6,000,000 Incremento=1,200,000

b) What marginal investment in accounts receivable will you obtain

1. average accounts receivable investment = Turnover with the current plan = 6
Rotation with the proposed plan=5
2.inversion marginal de cuentas por cobrar= Plan propuesto= $79,200,000
Actual plan = $55,000,000
Average marginal investment in accounts receivable = $24,000,000

c) Calculate the cost of the marginal investment in accounts receivable

marginal investment cost in accounts receivable = marginal investment in accounts receivable =
$24,000,000 Required return = 14%
Cost of marginal investment CXC=$3,388,000
Should the company implement the proposed change?
The additional benefit exceeds the additional cost. The proposed change should be implemented. However, the estimates should be made.
bad debts, information about the uncertainty of the income forecast to adopt the policy

A company makes all its sales on credit and does not offer any discount for early payment. It is considering
a 2% discount for payments within a maximum of 15 days; the current average collection period is 60 days.
sales of 40,000 units; the selling price per unit is $45, the variable cost per unit is $36 and the cost
unit average of $40, the current sales volume
The company expects that the change in credit conditions will lead to an increase in sales to 42,000 units.
that 70% of sales will take advantage of the discount and that the collection period will drop by 30 days, if the rate of
Company performance regarding investments of equal risk of 25% should the proposed discount be offered?

Ventas actuales=40,000 unidades Ventas propuestas=42,000 unidades

60 days
$36
Required return by the company=25%
1) Marginal contribution = selling price - variable cost
(45-36) (42,000-40,000)
=9(2,000)
$18,000
2) total variable cost of annual sales
with the proposed plan (42,000 x 36) = $1,512,000
=with the current plan= (40,000 x 36) =$1,440,000
3)rotación de cuentas por cobrar Con el plan propuesto =360/30 =12 Con el plan actual=360/60=6
4) Average investment in accounts receivable With the proposed plan = 1,512,000/12 = 126,000 With the plan
actual=1,440,000/6=$240,000
5) cost of marginal investment in accounts receivable
=(126,000-240,000)
-114,000 x 25%
-28,500 = savings in costs
6) Costs of early payment discounts
70% x 2% x 45 x 42,000
26,460
Utility of implementing the proposed plan
-5,960
$20,040
You should offer the early payment discount since it is high for the company.

A carpet factory is trying to assess the company's ability to make its operations more flexible.
Collection procedures, the company repairs 72,000 carpets a year at an average price of $32 each.
First, bad debt or uncollectible accounts expenses represent 1% of sales and collection expenses are
$60,000, the collection period is 40 days, the average cost per unit is $28, at
By flexibilizing the collection procedures, the company expects to save $40,000 a year in expenses, the accounts
bad debts will increase to 2% of sales and the average collection period will increase to 58 days, sales
repairs will increase by 1,000 per year. If the company has a required rate of return
Regarding investments of equal risk at 24%, what recommendation would you give to the company?

Ventas anuales actuales=72,000 Ventas anuales propuesto=73,000

40 days
2%
Required return by the company = 24%
($32 - $28) (73,000 - 70,000)
=4 x 3,000
$12,000
Total variable cost of annual sales
$2,044,000
3) Accounts Receivable Turnover
Con el plan propuesto=360/58=6 Con el plan actual=360/40=9
Average investment in accounts receivable
Con el plan propuesto=$2,044,000/6=$340,666.67 Con el plan actual=$2,016,000/9=$224,000
5) Cost of marginal investment in accounts receivable
= ($340,666.67-$224,000) =$116,666.67 x 25%=$29,166.67
cost of bad debts
$46,720
$46,720-$23,040
=$23,680
company recommendation utility
x = $12,000 - $29,166.67 - $23,680 x) = -40,846.67
we do not recommend relaxing accounts receivable

The company 'trees of hope' forecasts that the sales of its artificial Christmas trees will be...
Last year it was 500 units, there will be a 25% increase since he plans to give a 5% discount on the selling price.
actual of $350.
The company has calculated fixed costs of $2,000 (which include electricity, water, and land rent), which are covered by the
Current number of sales. Each little tree costs $150.00.
The average accounts receivable is 25 days, but it is expected that the strategy of granting a discount
accelerate the rotation 24x. The expected return for any investment is 12.5% annually. Is it beneficial for you to
company grant the discount? Do the necessary calculations to demonstrate your answer.

Data
500 units
25 days
Variable cost per unit: $150
12.5%
Marginal contribution of sales
Selling price - variable cost (350 - 150) (625 - 500)
200 (125)
$25,000
Costos variables de las ventas anuales Con el plan propuesto: 625 *150= $93,750 Con el plan actual: 500*150=$75000
Accounts Receivable Turnover
With the proposed plan: 360/15=24
With the current plan: 360/25=14.4
Average investment in accounts receivable:
With the proposed plan: 93,750/24 = $3,906.25 With the current plan: 75,000/14.4 = $5,208.33 Cost of the marginal investment in
CXC (3,906.25-5,208.33) *12.5%
-1,302.08*12.5%
162.76
Discount cost for early payment
(0.05*350*625)
10,937.5
Utility of launching the proposed plan
25,000 - (162.76) - 10,937.5
= 13,899.74
We must offer the early payment discount since the selling price is stable.
Calculate the investment

CURRENT PLAN

SALES $ 60,000.00
PV $ 10.00
CV $ 6.00
C AVERAGE $ 8:00
CF $ 120,000.00
PCP $ 30.00
UNCOLLECTIBLE RISK 1%
RENT/INVESTMENT 15%

Marginal Contribution Utilities/Sales

Marginal Investment Cost in Accounts Receivable

$ 498,000.00

RCC
$ 8:00

AVERAGE INVERSION OF THE CURRENT PLAN

$ 480,000.00

RCC
$ 12.00

COST OF MARGINAL BAD DEBTS

CTAS INCOB, PLAN NVO

NET UTILITY FROM THE NVO PLAN

 INVESTMENT PROM CXC = COST OF SALES / RCC

RCC = 360/PCP
NEW PLAN
$63,000.00

$ 45.00
2%

$12,000.00

$62,250.00

$40,000.00

$22,250.00

12,600.00
$ 6,000.00 $ 6,600.00
$ 2,062.50
COST OF GIVING UP THE DISCOUNT = ( DP / (1 - DP) ) * (360 / N)

SUPPLIER PAYMENT TERMS Days of Grace

A 2/10 NET 30 20
B 1/10 NET 70 60
C 3/20 NET 60 40
D 4/10 NET 60 50
 Payment Discount
DAYS PRIOR TO THE DUE DATE
EXPIRATION DATE
COST OF RESIGNATION DSC
36.73%
6.06%
27.84%
30.00%
EXERCISE1
What is the average investment in inventory in the following cases?
a) The company has sales of $25,000,000, a gross profit margin of 40%, and the average inventory turnover duration is d
b) The company has an annual cost of goods sold of $200,000 and an inventory turnover ratio of 6.
$2 million

a) The company has sales of $25,000,000, a gross profit margin of 40%, and the average inventory turnover duration is d.

The company has an annual cost of goods sold of $200,000 and an inventory turnover ratio of 6.

$2 million

EXERCISE2
A well-known company has sales of $200,000, a gross profit margin of $20, and an EPI of 45 days.
What will be the change in the average inventory investment if the inventory turnover rate changes to 7?
b) If the required rate of return on investments is equal to the risk of 18%, what profits or losses does it add?

What will be the change in the average inventory investment if the inventory turnover ratio varies to 7?

b) If the required rate of return on investments equals the risk of 18%, what profits or losses does it add?

EXERCISE3
a factory buys 100,000 units per month of a component. The inventory holding costs of the item are d
a) determine the CEP, the average inventory investment level, the quantity of losses, and the total inventory cost in the
1) without any change
The maintenance cost at 5% of the cost which is $2
the cost of the order is $15

EXERCISE 4
A company requires to maintain a minimum average use of coal for 20 days, which corresponds to 100 tons. The order
At what level of existence does the company need to reformulate its request?
level of existence