Canadian products is concerned about managing its operating assets and liabilities efficiently. Inventories have an avg. age of 110 days, and accounts receivable have an average of 50 days. Accounts payable are paid approximately 40 days after they arise. The firm has an annual sale of 36 million, its cost of goods sold represents 75 percent of sales, and it purchases represent 70 percent of cost of goods sold. Assume a 365 day year.
A. Calculate the firms OC (operating cycle)
B. Calculate the firms CCC cash conversion cycle
C. Calculate the amount of total resources Canadian products has invested in its CCC
D. Discus how management might be able to reduce the amount of total resources invested in the CCC
Sheth and Sons is considering changing it pay period for its salaried management from paying salaries every to week to paying monthly. The firm CFO Ken Smart, believes that such action will free up cash that can be used elsewhere in the business, which currently faces a cash crunch. In order to avoid a strong negative response from the salaried managers, the firm will simultaneously announce a new health plan that twill lower managers cost contributions without cutting benefits. Kena analysis indicates that the salaried managers bimonthly payroll is $1.8 million and is expected to remain at that level for the foreseeable future. Wit hthe bimonthly system there were 2.2 pay period in a month. Because the managers will be paid monthly, the monthly payroll will be about $4.0 million The annual cost ot the firm of the new health plan will bee $180,00. Ken Believes that because managers salaries accrue at a constant rate over the pay period, the average salaries over the period can be estimated by dividing the total amount by 2. The firm believes that it can earn 15%S annually on any funds mad available through the accrual of the managerâ??s salaries.
A. How much additional financing will Sheth and Sons obtain as a result of switching the pay period for managers salaries from every 2 weeks to monthly?
B. Should the firm implement the proposed change in pay periods?
Litespeed Products buys 200,000 motors per year from a supplier that can fulfill orders within 2 days of receiving them. Litespeed transmits its orders to this supplier electronically so the lead time to receive these orders is 2 days. Litespeeds order cost is about $295 per order and it carrying cost is about $37 per motor per year. The firm maintains a safety stock of motor equal to 6 days of usage. Assume a 365 day year.
A. What is litespeeds economic quantity (EOq) for the motors
B. What is the total cost of EOQ
C. How large a safety stock of motors should liteyear maintain
D. What is litespeeds reorder point for the motors?
E. If litespeed has an opportunity to reduce by 10 percent either its order cost or its carrying cost, which would result in the lowest total cost at the assoc. new EOQ?
F. How much total cost savings will result from the lowest cost strategy found in part (e) relative to the total cost found in part (b)
International oil company (IOC)uses credit scoring to evaluate gas credit card applications. The following table presents the financial and credit characteristics and weights (indicating the relative importance of each characteristic) used in the credit decision. The firms credit standards are to accept all applicants with credit scores of 80 or higher, to extend limited credit on probationary basis to applicants with scores higher than 70 and lower than 80, and to reject all applicants with scores lower than 70.
A. Use the date presented to find the credit score for each applicant
B. Recommend the appropriate action that the firm should take for each of the 3 applicants
Big Board company, a global manufacturer and distributor of both surfboard and snowboards, is in a seasonal business. Although surfboard sales are only mildly seasonal, the snowboard sales are very seasonal., driven by peak demand in the first and fourth calendar quarters of each year. The following table give the firms monthly sales for the immediate past quarter (oct through dec 2006) and its forecast month sales for the coming calendar year 2007.
Use the data given, calculate the payment patter of Big air boards accounts receivable, and commit on the firms monthly collections during calendar year 2007.© BrainMass Inc. brainmass.com October 25, 2018, 3:12 am ad1c9bdddf
The expert examines the concerns about managing operating assets and liabilities efficiently.
Winnepeg Corporation Operating Assets
Winnepeg Corporation is concerned about managing its operating assets and liabilities efficiently. Inventories have an average age of 110 days, and accounts receivable have an average age of 50 days. Accounts payable are paid approximately 40 days after they arise. The firm has annual sales of $36 million, its cost of goods sold represents 75% of sales, and its purchases represent 70% of cost of goods sold. Assume a 365-day year.
a. Calculate the firm's operating cycle (OC).
b. Calculate the firm's cash conversion cycle (CCC).
c. Calculate the amount of total resources Winnepeg Corporation has invested in its CCC.
d. Discuss how management might be able to reduce the amount of total resources invested in the CCC.