Discuss the following with APA references at least two to three paragraphs.
Explain the cash conversion cycle (CCC). Describe the CCC for your employer or company in an industry in which you’re interested. What are some specific things that your company could do to decrease your cash conversion cycle? Let’s be sure to describe, in pretty specific terms, the CCC for our company and what could be done to shorten it.
1, Which of the following actions should Reece Windows take if it wants to reduce its cash conversion cycle?
a. Sell common stock to retire long-term bonds.
b. Take steps to reduce the DSO.
c. Start paying its bills sooner, which would reduce the average accounts payable but not affect sales.
d. Sell an issue of long-term bonds and use the proceeds to buy back some of its common stock.
e. Increase average inventory without increasing sales.
2,
Brothers Breads has the following data. What is the firm’s cash conversion cycle?
Inventory conversion period = 50 days
Average collection period = 17 days
Payables deferral period = 25 days
a. 46 days
b. 38 days
c. 42 days
d. 34 days
e. 31 days
3, Mark’s Manufacturing’s average age of accounts receivable is 45 days, the average age of accounts payable is 40 days, and the average age of inventory is 69 days. Assuming a 365-day year, what is the length of its cash conversion cycle?
a. 78 days
b. 63 days
c. 67 days
d. 70 days
e. 74 days
4, Data on Nathan Enterprises for the most recent year are shown below, along with the days sales outstanding of the firms against which it benchmarks. The firm’s new CFO believes that the company could reduce its receivables enough to reduce its DSO to the benchmarks’ average. If this were done, by how much would receivables decline? Use a 365-day year.
Sales $110,000
Accounts receivable $16,000
Days sales outstanding (DSO) 53.09
Benchmark days sales outstanding (DSO) 20.00
a. $10,970
b. $9,973
c. $8,975
d. $12,067
e. $8,078
5, Thornton Universal Sales’ cost of goods sold (COGS) average $2,000,000 per month, and it keeps inventory equal to 50% of its monthly COGS on hand at all times. Using a 365-day year, what is its inventory conversion period?
a. 14.4 days
b. 16.7 days
c. 15.2 days
d. 11.7 days
e. 13.0 days
6, Shulman Inc. has the following data, in thousands. Assuming a 365-day year, what is the firm’s cash conversion cycle?
Annual sales = $45,000
Annual cost of goods sold = $30,000
Inventory = $4,500
Accounts receivable = $1,800
Accounts payable = $2,500
a. 43 days
b. 32 days
c. 39 days
d. 35 days
e. 28 days
7, Kiley Corporation had the following data for the most recent year (in millions). The new CFO believes (1) that an improved inventory management system could lower the average inventory by $4,000, (2) that improvements in the credit department could reduce receivables by $2,000, and (3) that the purchasing department could negotiate better credit terms and thereby increase accounts payable by $2,000. Furthermore, she thinks that these changes would not affect either sales or the costs of goods sold. If these changes were made, by how many days would the cash conversion cycle be lowered?
Original Revised
Annual sales: unchanged $110,000 $110,000
Cost of goods sold: unchanged $80,000 $80,000
Average inventory: lowered by $4,000 $20,000 $16,000
Average receivables: lowered by $2,000 $16,000 $14,000
Average payables: increased by $2,000 $10,000 $12,000
Days in year 365 365
a. 45.3
b. 37.4
c. 41.2
d. 49.8
e. 34.0
8, Newsome Inc. buys on terms of 3/15, net 45. It does not take the discount, and it generally pays after 60 days. What is the nominal annual percentage cost of its non-free trade credit, based on a 365-day year?
a. 27.59%
b. 25.09%
c. 30.35%
d. 33.39%
e. 36.73%
9, Howes Inc. purchases $4,562,500 in goods per year from its sole supplier on terms of 2/15, net 50. If the firm chooses to pay on time but does not take the discount, what is the effective annual percentage cost of its non-free trade credit? (Assume a 365-day year.)
a. 20.11%
b. 22.28%
c. 24.63%
d. 21.17%
e. 23.45%
10, A lockbox plan is
a. used to speed up the collection of checks received.
b. used primarily by firms where currency is used frequently in transactions, such as fast food restaurants, and less frequently by firms that receive payments as checks.
c. used to slow down the collection of checks our firm writes.
d. used to protect cash, i.e., to keep it from being stolen.
e. used to identify inventory safety stocks.
