Ch18+Answers+to+assigned+problems+v6 - CHAPTER 18...

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CHAPTER 18 SHORT-TERM FINANCE AND PLANNING Solutions to Questions and Problems NOTE: All end of chapter problems were solved using a spreadsheet. The final answer for each problem is found without rounding during any step in the problem. 3. a. Increase. If receivables go up, the time to collect the receivables would increase, which increases the operating cycle. b. Increase. If credit repayment times are increased, customers will take longer to pay their bills, which will lead to an increase in the operating cycle. c. Decrease. If the inventory turnover increases, the inventory period decreases. d. No change. The accounts payable period is part of the cash cycle, not the operating cycle. e. Decrease. If the receivables turnover increases, the receivables period decreases. f. No change. Payments to suppliers affects the accounts payable period, which is part of the cash cycle, not the operating cycle. 6. The operating cycle is the inventory period plus the receivables period. The inventory turnover and inventory period are: Inventory turnover = COGS/Average inventory Inventory turnover = $52,827/{[$8,413 + 10,158]/2} Inventory turnover = 5.6892 times Inventory period = 365 days/Inventory turnover Inventory period = 365 days/5.6892 Inventory period = 64.16 days And the receivables turnover and receivables period are: Receivables turnover = Credit sales/Average receivables
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Ch18+Answers+to+assigned+problems+v6 - CHAPTER 18...

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