Question 1

Firms can decrease their cash conversion cycle by doing all of the following except:

Accepted Answer

The cash conversion cycle is a measure of the time it takes for a firm to convert its investments in inventory and other resources into cash flows from sales. Delaying paying bills, reducing collection time, and increasing inventory turnover all help to decrease the cash conversion cycle by speeding up the inflow of cash. However, reducing production costs, while it may help the overall profitability of the firm, does not directly impact the cash conversion cycle because it does not affect the timing of cash flows.

Question 2

Montreal Bagel Bakery collects 35% of its monthly sales immediately and the rest a month later.Its production costs are 65% of sales.It holds 1 month of sales in inventory, and pays half its bills immediately and half after 30 days.Calculate the operating cycle (OC)and the cash conversion cycle (CCC)for Montreal Bagel Bakery.

Accepted Answer

The operating cycle (OC) is the sum of the inventory period and the accounts receivable period. The cash conversion cycle (CCC) is the operating cycle minus the accounts payable period. Inventory is held for 1 month (30 days), and 65% of sales are collected a month later, which means the accounts receivable period is also 30 days. Therefore, OC = 30 (inventory period) + 30 (accounts receivable period) = 60 days. Since half of the bills are paid immediately and half after 30 days, the accounts payable period is 15 days. Thus, CCC = OC - accounts payable period = 60 - 15 = 45 days. However, the correct calculation for OC and CCC based on the given choices seems to be a misunderstanding in the explanation. Given the choices, the correct OC and CCC are calculated based on specific assumptions about the inventory, receivables, and payables periods that are not standardly derived from the given information. The correct answer according to the choices provided is A, but the explanation provided here does not align with standard calculations, indicating a possible mistake in interpreting the question or the choices.

Question 3

Explain what the break-even sales growth rate means and what impact it has on the development of a firm's operations and credit granting (financial)policy.

Accepted Answer

The answer of Explain what the break-even sales growth rate...

Question 4

You recently overheard your boss stating that, "Our company's high growth rate is making it difficult for us to keep the business open, and we're frequently forced to rely on bank loans to keep us from going bankrupt." This statement confused you: isn't a high growth rate a good thing to have? Clearly explain why or why not and discuss how firms with a problem such as yours resolve their dilemma.

Accepted Answer

The answer of You recently overheard your boss stating that,...

Question 5

Montreal Bagel Bakery collects 70% of its monthly sales immediately and the rest a month later.Its production costs are 65% of sales.It holds 1 month of sales in inventory, and it pays half its bills immediately and half after 30 days.Calculate the cash conversion cycle and the operating cycle for Montreal Bagel Bakery.

Accepted Answer

The answer of Montreal Bagel Bakery collects 70% of its...

Question 6

A company has revenue of $2,043,693, accounts receivable of $159,503, average inventory of $71,505, and accounts payable of $157,210.How many days are the operating cycle (OC)and the cash conversion cycle (CCC)?

Accepted Answer

The answer of A company has revenue of $2,043,693, accounts...

Question 7

Vancouver Sushi Limited collects 35% of its monthly sales immediately and the rest a month later.Its production costs are 60% of sales.It holds 1 month of sales in inventory, and it pays 60% its bills immediately and 40% after 30 days.Calculate the cash conversion cycle and the operating cycle for Vancouver Sushi Limited.

Accepted Answer

The answer of Vancouver Sushi Limited collects 35% of its...

Question 8

The following information concerning Sherwood Ltd.has been made available for the development of cash and other budget information for the months of July, August, and September. Selected balances at July 1^st are expected to be: The budget is to be based on the following assumptions: $\bullet$Sixty percent (60.0%)of the billings are collected in the month of the sale; 25% are collected in the month following the sale; 10% are collected in the 2^nd month following the sale and 5% are estimated to be uncollectible $\bullet$Fifty-five percent (55.0%)of all product purchases are paid for in the month purchased, with the remaining 45% paid in the month following the purchase.Each unit of product costs $22. $\bullet$Selling, general and administrative expenses, of which $2,000 is depreciation, are equal to 25% of the current month's sales dollar.These expenses are paid for in the month incurred. $\bullet$The Board of Directors of Sherwood Ltd.has declared a cash dividend totaling $75,000 that is to be paid in August. $\bullet$Sherwood Ltd.has a considerable investment portfolio that provides investment income each month of $12,500. $\bullet$Sherwood Ltd.is required to pay an installment on their current year's income tax assessment in July.The amount due is $12,000. Actual and projected sales and purchases are as follows: Prepare a cash budget for the months of July and August, including a cash receipts and cash disbursements schedule.

Accepted Answer

The answer of The following information concerning Sherwood Ltd.has been...

Question 9

Illustrate and clearly explain how profitable businesses can become bankrupt due to the mismanagement of their working capital.In your explanation, define what working capital is, along with its major components, as well as the difference between cash flow and profits.Finally, describe how businesses can mitigate this problem of going broke while still being technically profitable.

Accepted Answer

The answer of Illustrate and clearly explain how profitable businesses...

Question 10

Explain why preparing a cash budget is important for the sustainability of an organization?

Accepted Answer

The answer of Explain why preparing a cash budget is...

Question 11

Montreal Bagel Bakery collects 45% of its monthly sales immediately and the rest a month later.Its production costs are 60% of sales.It holds 1 month of sales in inventory, and it pays half its bills immediately and half after 30 days.Calculate the cash conversion cycle and the operating cycle for Montreal Bagel Bakery.

Accepted Answer

The answer of Montreal Bagel Bakery collects 45% of its...

Quiz 23: Working Capital Management: General Issues

Firms can decrease their cash conversion cycle by doing all of the following except:

Explain what the break-even sales growth rate means and what impact it has on the development of a firm's operations and credit granting (financial)policy.

A company has revenue of $2,043,693, accounts receivable of $159,503, average inventory of $71,505, and accounts payable of $157,210.How many days are the operating cycle (OC) and the cash conversion cycle (CCC) ?

Explain why preparing a cash budget is important for the sustainability of an organization?