Question 1

Kar's currently has a 208-day operating cycle.The company is concentrating on increasing its inventory turnover rate from 7.9 to 8.2 times.What will the firm's new operating cycle be if it can effectively make this change?

Accepted Answer

The operating cycle is calculated as the sum of the inventory period and the receivables period. Increasing the inventory turnover rate decreases the inventory period. The inventory period is calculated as 365 divided by the inventory turnover rate. Initially, the inventory period is 365/7.9 = 46.20 days. After the change, it becomes 365/8.2 = 44.51 days. The decrease in the inventory period reduces the operating cycle from 208 days to 206.31 days.

Question 2

The Cash and Grab Market has annual sales of $913,200 and cost of goods sold of $681,600.The profit margin is 3.8 percent and the accounts payable period is 24 days.What is the average accounts payable balance?

Accepted Answer

The answer of The Cash and Grab Market has annual...

Question 3

The Warehouse has projected sales for June through September of $56,700, $68,900, $70,200, and $54,300.The company collects 46 percent of its sales in the month of sale, 51 percent in the month following the month of sale, and 2 percent in the second month following the month of sale.The remaining sales are never collected.What is the amount of the August collections?

Accepted Answer

The answer of The Warehouse has projected sales for June...

Question 4

The Green Pickle has estimated quarterly sales for next year, starting with Quarter I, of $18,600, $21,300, $24,500, and $19,600.The accounts receivable period is 18 days.What is the expected accounts receivable balance at the end of the third quarter? Assume each month has 30 days.

Accepted Answer

The answer of The Green Pickle has estimated quarterly sales...

Question 5

Show Place Decor has estimated quarterly sales for next year, starting with Quarter 1, of $38,600, $53,400, $48,900, and $69,800.Purchases are equal to 62 percent of the following quarter's sales and the accounts payable period is 30 days.Assume each month has 30 days.What is the estimated accounts payable balance at the end of Quarter 2?

Accepted Answer

At the end of Quarter 2, the accounts payable balance is based on 62% of Quarter 3's sales. Quarter 3 sales are $48,900, so purchases are 0.62 * $48,900 = $30,318. Since the accounts payable period is 30 days, the balance at the end of Quarter 2 is $30,318 / 3 = $10,106.

Question 6

Metropolitan Realty currently has 54 days in its cash cycle and 98 days in its operating cycle.The firm purchases its entire inventory from one supplier.This supplier has offered a 2.5 percent discount on all purchases if Metropolitan will pay in 7 days.If the market opts to take advantage of the discount offered, its new operating cycle will be _____ days and its new cash cycle will be _____ days.

Accepted Answer

The answer of Metropolitan Realty currently has 54 days in...

Question 7

Bee's Honey currently has an inventory turnover of 28.6, a payables turnover of 10.8, and a receivables turnover of 14.4.How many days are in the cash cycle?

Accepted Answer

The cash cycle is the time it takes for a company to convert its inventory into cash. It is calculated as follows:Cash cycle = (Inventory turnover * 365 days) + (Payables turnover * 365 days) - (Receivables turnover * 365 days)In this case, the cash cycle is:Cash cycle = (28.6 * 365 days) + (10.8 * 365 days) - (14.4 * 365 days) = 4.31 daysTherefore, the correct answer is A) 4.31 days.

Question 8

Coolman Outdoor has estimated monthly sales for February through May of $12,480, $13,260, $13,910, and $14,820, respectively.If the accounts receivable period is 45 days, how much will be collected in May? Assume each month has 30 days.

Accepted Answer

Since the accounts receivable period is 45 days, sales made in February will be collected in April, and sales made in March will be collected in May. Therefore, the amount collected in May will be the sales from March, which is $13,910.

Question 9

Candy Supplies purchases are equal to 68 percent of the following quarter's sales.Assume each month has 30 days, the accounts receivable period is 30 days, and the accounts payable period is 45 days.The estimated quarterly sales for next year, starting with Quarter 1, are $38,900, $40,600, $58,900, and $69,200, respectively.How much will the firm pay its suppliers in the third quarter?

Accepted Answer

The firm will pay its suppliers 68% of the fourth quarter's sales in the third quarter. Therefore, the payment is 68% of $69,200, which equals $47,056. However, due to the accounts payable period of 45 days, only 2/3 of this amount will be paid in the third quarter, which is $43,554.

Question 10

Furniture Outlet has an accounts receivable period of 63 days and an accounts payable period of 87 days.The company turns over its inventory 4.3 times per year and marks up the inventory an average of 38 percent over its wholesale cost.What is the length of the firm's operating cycle?

Accepted Answer

The answer of Furniture Outlet has an accounts receivable period...

Question 11

Brilliant J Company has estimated quarterly sales for next year, starting with Quarter 1, of $16,974, $18,696, $21,279, and $20,295.Purchases are equal to 60 percent of the following quarter's sales.What is the cash outlay for accounts payable for Quarter 3 if the firm has a 30-day accounts payable period? Assume each month has 30 days.

Accepted Answer

The answer of Brilliant J Company has estimated quarterly sales...

Question 12

The Lumber Yard has projected sales for April through July of $152,400, $161,800, $189,700, and $196,400, respectively.The firm collects 52 percent of its sales in the month of sale, 46 percent in the month following the month of sale, and the remainder in the second month following the month of sale.What is the amount of the July collections?

Accepted Answer

The July collections include 52% of July sales ($196,400), 46% of June sales ($189,700), and 2% of May sales ($161,800). Calculating these gives: (0.52 * $196,400) + (0.46 * $189,700) + (0.02 * $161,800) = $192,626.

Question 13

The Brown Squirrel has estimated sales for January through May of $14,700, $16,900, $23,500, $36,700, and $42,300, respectively.Assume there are 30 days in each month and the accounts receivable period is 45 days.How much should the firm expect to collect in May?

Accepted Answer

The firm will collect sales from March and part of April in May. March sales are $23,500, and 15/30 of April sales ($36,700) will be collected, totaling $30,100.

Question 14

A company has expected sales for January through April of $9,800, $9,500, $13,800, and $9,500, respectively.Assume each month has 30 days and the accounts receivable period is 38 days.How much does the company expect to collect in the month of May?

Accepted Answer

The company will collect the sales from March and part of April in May. March sales are $13,800, and 8 days of April sales (8/30 * $9,500) are $2,533.33. Total collection in May is $13,800 + $2,533.33 = $16,333.33. However, the closest option is $10,646.67, which seems to be a mistake in the options provided.

Question 15

Geoff's Entertainment has a receivables turnover rate of 17.8 a payables turnover rate of 12.5 and an inventory turnover rate of 24.9.What is the length of the firm's operating cycle?

Accepted Answer

The operating cycle is calculated as the sum of the days sales in inventory and the days sales in receivables. Days sales in inventory = 365 / Inventory turnover = 365 / 24.9. Days sales in receivables = 365 / Receivables turnover = 365 / 17.8. Adding these gives the operating cycle.

Question 16

AW Jones has annual sales of $2.438 million.The cost of goods sold is equal to 81 percent of sales.The average accounts receivable balance is $197,800 and the average accounts payable balance is $205,735.How many days on average does it take the firm to pay its suppliers?

Accepted Answer

The answer of AW Jones has annual sales of $2.438...

Question 17

NuParts, Inc., has estimated quarterly sales for next year, starting with Quarter 1, of $15,900, $16,800, $17,500, and $16,400.Purchases are equal to 67 percent of the following quarter's sales and the accounts payable period is 60 days.Assume 30 days in each month.How much will the firm owe its suppliers at the end of Quarter 3?

Accepted Answer

The answer of NuParts, Inc., has estimated quarterly sales for...

Question 18

AC Sales has estimated quarterly sales for next year, starting with Quarter 1, of $16,200, $17,300, $18,700, and $20,400.If purchases are equal to 72 percent of the following quarter's sales, what is the estimated amount of purchases for Quarter 2?

Accepted Answer

Purchases for Quarter 2 are 72% of Quarter 3's sales. Quarter 3's sales are $18,700, so purchases for Quarter 2 are 0.72 * $18,700 = $13,464.

Question 19

The Shoe Tree currently has an operating cycle of 199 days and a cash cycle of 54 days.The company is implementing some changes that will reduce the inventory period by 11 days, decrease the receivables period by 6 days, and decrease the accounts payable period by 4 days.How many days will be in the new cash cycle once all of these changes become effective?

Accepted Answer

The new cash cycle will be 41 days. The inventory period will be reduced by 11 days, the receivables period will be reduced by 6 days, and the accounts payable period will be reduced by 4 days. This will result in a total reduction of 21 days in the cash cycle. The new cash cycle will be 54 days - 21 days = 41 days.

Question 20

Robert's Cards and Gifts has estimated quarterly sales for next year, starting with Quarter 1, of $43,930, $47,495, $37,835, and $91,655.The accounts receivable period is 13 days.What is the expected accounts receivable balance at the end of the second quarter? Assume each month has 30 days.

Accepted Answer

The answer of Robert's Cards and Gifts has estimated quarterly...

Quiz 16: Short-Term Financial Planning