Log in
Finance
1
answer
0
watching
502
views

1. Which of the following statements is most CORRECT?

A. If a firm takes actions that reduce its days sales outstanding (DSO), then, other things held constant, this will lengthen its cash conversion cycle (CCC).

B. If a firm "stretches" (i.e., delays paying) its accounts payable, then other things held constant, this will lengthen its cash conversion cycle (CCC).

C. If a firm busy on terms of 2/10 net 30, it should pay as early as possible during the discount period.

D. As a rule, managers should try to always use the free component of trade credit but should use the costly component only if the cost of this credit is lower than the cost of credit from other sources. E. If a firm carries a constant amount of receivables as sales decline, then, other things held constant, this will reduce its cash conversion cycle (CCC).

Watch
1
answer
0
watching
502
views

For unlimited access to Homework Help, a Homework+ subscription is required.

Bunny Greenfelder
Bunny GreenfelderLv2
28 Sep 2019

Unlock all answers

Get 1 free homework help answer.
Already have an account? Log in
Share

Related questions

Which of the following statements is correct?
a) If a security saw that a firm’s days’ sales outstanding (DSO)was higher than the industry average, and was increasing andtrending still higher, this would be interpreted as a signstrength.
b) A high average DSO indicates that none of this customers arepaying on time. In addition, it makes no sense to evaluate thefirm’s DSO with the firm credit terms.
c) There is no relationship between the days’ sales outstanding DSOand the average collection period ACP. These ratios measureentirely different things.
d) A reduction in accounts receivable would have no effect on thecurrent ratio, but it would lead to an increase in the quickratio.
e) If a firm increases its sales while holding its accountsreceivable constant, then, other things held constant, its days’sales outstanding will decline.

CASH CONVERSION CYCLE Chastain Corporation is trying to determine the effect of its inventory turnover ratio and days sales outstanding (DSO) on its cash conversion cycle. Chastain’s 2016 sales (all on credit) were $121,000; its cost of goods sold is 80% of sales; and it earned a net profit of 2%, or $2,420. It turned over its inventory 7 times during the year,and its DSO was 37 days. The firm had fixed assets totaling $42,000. Chastain’s payables deferral period is 35 days.

Calculate Chastain’s cash conversion cycle.

Assuming Chastain holds negligible amounts of cash and marketable securities, calculate its total assets turnover and ROA.

Suppose Chastain’s managers believe that the inventory turnover can be raised to 9.9 times. What would Chastain’s cash conversion cycle, total assets turnover, and ROA have been if the inventory turnover had been 9.9 for 2016?

CASH CONVERSION CYCLE Chastain Corporation is trying to determine the effect of its inventory turnover ratio and days sales outstanding (DSO) on its cash conversion cycle. Chastain’s 2016 sales (all on credit) were $121,000; its cost of goods sold is 80% of sales; and it earned a net profit of 2%, or $2,420. It turned over its inventory 7 times during the year,and its DSO was 37 days. The firm had fixed assets totaling $42,000. Chastain’s payables deferral period is 35 days.

Calculate Chastain’s cash conversion cycle.

Assuming Chastain holds negligible amounts of cash and marketable securities, calculate its total assets turnover and ROA.

Suppose Chastain’s managers believe that the inventory turnover can be raised to 9.9 times. What would Chastain’s cash conversion cycle, total assets turnover, and ROA have been if the inventory turnover had been 9.9 for 2016?

a. Cash conversion cycle Parramore Corp has $19 million of sales, $1 million of inventories, $4 million of receivables, and $3 million of payables. Its cost of goods sold is 65% of sales, and it finances working capital with bank loans at an 9% rate. Assume 365 days in year for your calculations. Do not round intermediate steps. What is Parramore's cash conversion cycle (CCC)? Do not round intermediate calculations. Round your answer to two decimal places.

ans: 17.73 days

b. If Parramore could lower its inventories and receivables by 9% each and increase its payables by 9%, all without affecting sales or cost of goods sold, what would be the new CCC? Do not round intermediate calculations. Round your answer to two decimal places.

ans: .18 days

c. How much cash would be freed up, if Parramore could lower its inventories and receivables by 9% each and increase its payables by 9%, all without affecting sales or cost of goods sold? Do not round intermediate calculations. Round your answer to the nearest cent. Write out your answer completely. For Example, 13.2 million should be entered as 13,200,000.

d.By how much would pretax profits change, if Parramore could lower its inventories and receivables by 9% each and increase its payables by 9%, all without affecting sales or cost of goods sold? Do not round intermediate calculations. Round your answer to the nearest cent. Write out your answer completely. For Example, 13.2 million should be entered as 13,200,000.

Weekly leaderboard

Home
Homework Help 3,900,000
Finance 370,000
Start filling in the gaps now
Log in