Answer: False
Explanation:
The cash cycle is also referred to as the cash conversion cycle and it is used to know the number of days it'll take companies to turn raw materials into making money.
It is the timeframe from buying raw materials for production purpose till the moment the product that was made is being sold and money gotten from the sale.
Answer:
Residual Income = Net Income minus (target income)
Target income = rate of returns x operational Assets
A.
Cameras and camcorders investment centre
Residual income = 6,900,000 - (12% x 29,000,000)
= $3,420,000
B.
Phones and communications investment centre
Residual income = 1,548,000 - (12% x 12,900,000)
= $0
C.
Computers and accessories investment centre
Residual income = 800,000 - (12% x 16,600,000)
= -$1,192,000
Answer:
The target stock price in year 1 is $51.12
Explanation:
Given SE = $6 MIL, NI= $906 000, Div= $408180, Shares= 200000, PE ratio= 24 , SP =?
W e will use the price earning ratio as we are are given the benchmark PE ratio and this ratio measures the stock price relative to it profits
PE = Stock price / Earnings per share
Need to calculate Earnings per share
EPS = net Income - dividends/ oustanding Shares
=906000-480180/200000
=$2.1291/$2.13
Sustitute in the formula for PE ratio
24 = Stock Price/2.13
Stock Price = $51.12
Therefore the target stock price in year 1 is $51.12
It results in lower short run average cost in economies of sale .
<h3>Economies of scale</h3>
Economies of scale refers to the situation where, as the quantity of output goes up, the cost per unit goes down. This is the idea behind “warehouse stores” like Costco or Walmart. In everyday language: a larger factory can produce at a lower average cost than a smaller factory. Figure 2 illustrates the idea of economies of scale, showing the average cost of producing an alarm clock falling as the quantity of output rises. For a small-sized factory like S, with an output level of 1,000, the average cost of production is $12 per alarm clock. For a medium-sized factory like M, with an output level of 2,000, the average cost of production falls to $8 per alarm clock. For a large factory like L, with an output of 5,000, the average cost of production declines still further to $4 per alarm clock.
One prominent example of economies of scale occurs in the chemical industry. Chemical plants have a lot of pipes. The cost of the materials for producing a pipe is related to the circumference of the pipe and its length. However, the volume of chemicals that can flow through a pipe is determined by the cross-section area of the pipe.
Learn more about economies of scale here :
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