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1 year ago

Does increasing average payment period decrease operating cycle

Business

1 answer:

Aleksandr-060686 [28]1 year ago

3 0

Yes , the increasing average payment period decreases the operating cycle

All small business owners know the importance of liquidity-have enough cash on hand to pay the bills. For this reason, business owners and managers monitor the cash conversion cycle. This shows how quickly companies are moving from paying inventory to receiving cash for sold inventory. An important factor in calculating a company's cash conversion cycle is the accounts payable period. The longer the period, the shorter the cycle.

The cash conversion cycle can be calculated using the data readily available on the company's balance sheet and income statement. It has three components. "Inventory days". On average, it indicates how long a product remains in stock before it is sold. "Accounts receivable days" or A / R days. This shows how long it takes a customer to pay an invoice. "Vendor date" or A / P date.

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Copa Corporation is considering the purchase of a new machine costing $150,000. The machine would generate net cash inflows of $

eduard

Answer:

Explanation:

Internal rate of return is the discount rate that equates the after tax cash flows from an investment to the amount invested

IRR can be calculated with a financial calculator

Cash flow in year 0 = $-150,000

Cash flow each year from year 1 to 5 = $43,690

IRR = 14%

To find the IRR using a financial calculator:

1. Input the cash flow values by pressing the CF button. After inputting the value, press enter and the arrow facing a downward direction.

2. After inputting all the cash flows, press the IRR button and then press the compute button.

4 0

3 years ago

Medallion Cooling Systems, Inc., has total assets of $9,800,000, EBIT of $2,050,000, and preferred dividends of $201,000 and

Ugo [173]

Answer:

Earnings per share:

0% debt = $5.145 per share

15% debt = $5.487 per share

30% debt = $6.203 per share

45% debt = $6.386 per share

60% debt = $6.570 per share

Explanation:

The earnings per share is the monetary value of how much each share of common stock outstanding has earned. The earnings per share can be calculated by dividing the Net Income attributable to common stockholders by the number of common stock shares outstanding.

Net Income attributable to Common stockholders = Net Income - Preferred stock dividends

Thus, Earnings per share = (Net Income - Preferred stock dividends) / Number of common stock shares outstanding

To calculate Earnings per share at each level of indebtedness, we first need to calculate the net income at each debt level. The net income will change as interest is deducted before calculating net income.

Net Income = EBIT - interest - tax

Total debt = Total assets * weightage of debt in capital structure

Tax = EBT * tax rate

a. 0% debt

Net Income = 2,050,000 - 0 - (2050000 * 0.4) = $1,230,000

Earnings per share = (1230000 - 201000) / 200000 = $5.145 per share

b. 15% debt

Total debt = 9,800,000 * 0.15 = 1470000

EBT = 2,050,000 - (1470000 * 0.078) = $1935340

Net Income = 1935340 - ( 1935340 * 0.4) = $1161204

Earnings per share = (1161204 - 201000) / 175000 = $5.487 per share

c. 30% debt

Total debt = 9,800,000 * 0.30 = 2940000

EBT = 2050000 - (2940000 * 0.091) = $1782460

Net Income = 1782460 - (1782460 * 0.4) = $1069476

Earnings per share = (1069476 - 201000) / 140000 = $6.203 per share

d. 45% debt

Total debt = 9,800,000 * 0.45 = 4410000

EBT = 2050000 - (4410000 * 0.121) = $1516390

Net Income = 1516390 - (1516390 * 0.4) = $909834

Earnings per share = (909834 - 201000) / 111000 = $6.386 per share

e. 60% debt

Total debt = 9,800,000 * 0.60 = 5880000

EBT = 2050000 - (5880000 * 0.152) = $1156240

Net Income = 1156240 - (1156240 * 0.4) = $693744

Earnings per share = (693744 - 201000) / 75000 = $6.570 per share

6 0

3 years ago

_____ are different, even within the same job. A. Occupations b. Workplaces c. Careers d. Interest rates Please select the best

nevsk [136]

B) workplaces

The location may be different but the job stays the same

7 0

2 years ago

One of the BEST methods for ensuring that a negotiation proceeds along substantive lines is to frame the discussion around:

Daniel [21]

Answer: Objective criteria. The correct answer is C.

Explanation:

By using objective criteria, this helps to ensure the best way that the negotiation will proceed along the lines of the discussion. Mangers will use negotiation to influence his productivity in his/her department. They will be able to avoid excessive interface by negotiating for more money and time.

Objective criteria is when real and factual information is used at work, with police, or even during a loan process. This is most often used when a third party is involved in the negotiation process. The third party will know the relevant information related to negotiation and will be able to give clear and precise information to all parties involved.

5 0

3 years ago

What is the payback period for a project with an initial investment of $180,000 that provides an annual cash inflow of $40,000 f

kotykmax [81]

Answer:

It will take 5.2 years to cover the initial investment.

Explanation:

The payback period is the time required to cover the initial investment.

year 1= 40,000 - 180,000= -140,000

Year 2= 40,000 - 140,000= -100,000

Year 3= 40,000 - 100,000= -60,000

Year 4= 25,000 - 60,000= -35,000

Year 5= 25,000 - 35,000= -10,000

Year 6= 50,000 - 10,000= 40,000

To be more accurate:

(10,000/50,000)= 0.2

It will take 5.2 years to cover for the initial investment.

5 0

2 years ago