Current Asset Management 7

# Current Asset Management 7 - year if sales can be...

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Old Exam Questions - Current Asset Management Page 7 of 12 Pages 14. Assume that, on average, a firm sells \$2,000,000 in merchandise a month and that it keeps inventory equal to one-half of its monthly sales on hand at all times. Determine the firm’s inventory conversion period if it analyzes its accounts using a 365-day year A. 20.1 days B. 30.7 days C. 25.5 days D. 10.4 days E. 15.2 days 15. Assume that your company has annual sales of \$80,000,000; keeps average inventory of \$20,000,000; and, on average, has accounts receivable of \$16,000,000. The firm buys all raw materials on credit, its trade credit terms are net 35 days, and it pays on time. The firm’s managers are searching for ways to shorten the cash conversion cycle. Determine what the net change in the cash conversion cycle will be, using a 365-day
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Unformatted text preview: year, if sales can be maintained at existing levels but inventory can be lowered by \$4,000,000 and accounts receivable lowered by \$2,000,000. A. 15 days longer B. 27 days longer C. no change D. 27 days shorter E. 15 days shorter 16. You are given the following information concerning your company: Income Statement Year 0 Year 1 Sales 3,600.00 4,320.00 Variable Costs - 2,880.00 Gross Profit 720.00 Fixed Costs - 400.00 Bad Debt Expense: Original - 54.00- 54.00 New ---EBIT 266.00 Interest: Original - 100.00- 100.00 New ---EBT 166.00 Taxes (40%) - 66.40 Net Income 99.60 • Assume a 360-day year. • Current sales are \$10 per day. • Variable costs are equal to 80 percent of sales....
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