ORIE 3150 Slides September 15 2011

ORIE 3150 Slides September 15 2011 - ORIE3150 September 15,...

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ORIE 3150 September 15, 2011
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Notes Homework #1 solutions posted. Be sure you know how to solve problems #7 and #8. Homework #2 is due tomorrow by 4:30 PM in the homework submission box.
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BP Oil Spill Plan included plan for  walruses in Gulf of Mexico
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Inventory Turnover The “retail revolution” began in the early 1960’s More inventory turns meant you could live with lower gross profits Kresge started K-Mart, Dayton’s started Target. Traditional Dept. Stores: 4 turns K-Mart, Wal-Mart, Target: ~8 turns
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Inventory Turnover Year over the Inventory Average CGS Annual Year per Turns Inventory =
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Approximating Inventory, Accounts  Payable, and Accounts Receivable We usually will NOT know the balances in these accounts with any precision. So, we will use the approximation that Beginning Inventory + Ending Inventory Average Inventory 2
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Inventory Turnover – Days on Hand Year per Turns Inventory 365 Hand On Inventory of Days =
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Inventory Turnover Harley Davidson sells to distributors, so they keep little inventory of finished motorcycles, hence they have 9+ turns per year (it was even smaller pre-recession).
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Accounts Receivables Turnover Indicates how quickly our customers pay us Includes cash sales (instant!) and credit sales (have to wait). A/R Average Sales Net Turnover s Receivable Accounts =
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Payables Turnover Indicates how quickly we pay our bills. Watched carefully by suppliers, they may not extend trade credit if this is bad. A/P Average Sold Goods of Cost Turnover Payables =
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Cash Cycle These three quantities make up the cash cycle. The cash cycle determines the company’s need for cash. Some industries have favorable cash cycles, some have unfavorable ones.
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Good Web Site finance.yahoo.com
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WMT (you may know as Wal-Mart)
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WMT
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WMT - Inventory Year over the Inventory Average CGS Annual Year per Turns Inventory = 315,287 Inventory Turns per Year 9.135 (36,318 + 32,713)/2 = = They turn the inventory 9.135 times per year or every 39.96 days.
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WMT – A/R Net Sales Accounts Receivables Turnover Average A/R = 421,849 Accounts Receivables Turnover 91.379 (5,089 + 4,144)/2 = = The average age of A/R is 365/91.379 or only 3.99 days It would be difficult to get this under 30 days, so we can guess that much less than 10% of all sales are credit sales.
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Turnover is 6.125 or the age is 59.59 days
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ORIE 3150 Slides September 15 2011 - ORIE3150 September 15,...

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