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vampirchik [111]
3 years ago
7

Van Den Borsh Corp. has annual sales of $68,735,000, an average inventory level of $15,012,000, and average accounts receivable

of $10,008,000. The firm's cost of goods sold is 85% of sales.
The company makes all purchases on credit and has always paid on the 30th day.
However, it now plans to take full advantage of trade credit and to pay its suppliers on the 40th day. The CFO also believes that sales can be maintained at the existing level but inventory can be lowered by $1,946,000 and accounts receivable by $1,946,000.

What will be the net change in the cash conversion cycle, assuming a 365-day year?

Round to the nearest whole day.

a. –25 days

b. –31 days

c. –27 days

d. –32 days
Business
1 answer:
Romashka-Z-Leto [24]3 years ago
6 0

Answer:

The answer is d. -32 days.

Explanation:

<u>*The before change cash conversion cycle</u> = Days of inventory outstanding + Days of receivables outstanding - Days of payable outstanding.

in which:

Days of inventory outstanding = Average inventory / Cost of good sold x 365 = ( 15,012,000 / ( 68,735,000 x 0.85) ) x 365 = 94 days

Days of receivables outstanding = Average Receivables / Revenue x 365 = ( 10,008,000 / 68,735,000 x 365 = 53 days

Days of payable = 30 days

=> Before change cash conversion cycle = 117 days.

* <u>The after-change cash conversion cycle</u> is calculated with the same formula, however with estimated changes be applied in the formula as followed:

Days of inventory outstanding = Average inventory / Cost of good sold x 365 = ( (15,012,000 - 1,946,000) / ( 68,735,000 x 0.85) ) x 365 = 82 days

Days of receivables outstanding = Average Receivables / Revenue x 365 = ( (10,008,000 - 1,946,000) / 68,735,000 x 365 = 43 days

Days of payable = 40 days

=> After-change cash conversion cycle = 82 + 43 - 40 = 85 days

<u>=> Net change is 85 - 117 = -32 days</u>

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When transportation costs are added to production costs, it becomes unprofitable to ship some products over a large distance. Th
pishuonlain [190]

Answer:

Option C. Have a low value-to-weight ratio.

Explanation:

The reason is that the transportation cost is connected with the weight of the product whereas the profit of the profit will diminish if the value to weight is low which means that the profit generated is very low which will be paid off to transport the product. So the option C is correct.

Option A is not connected with transportation cost which turns the profitable products into unprofitable products due to its high cost.

Option B is opposite of option C hence both are incorrect.

Option D is incorrect because if the product is only produced in one region then it will be the only firm offering that product which means it can price its product geographically to adjust the transportation cost. Hence it is also not connected with the transportation cost which turns the profitable products into unprofitable products due to its high cost.

7 0
3 years ago
Your wealthy uncle established a $2,100 bank account for you when you were born. For the first 9 years of your life, the interes
zloy xaker [14]

The future value of the account established by the wealthy uncle will be $3,943.86 after 23 years at the two interest rates.

<h3>What is future value?</h3>

The future value of an amount is the value obtained in the future after compounding at an interest rate.

The future values after years 9 and 23 can be determined using an online finance calculator as follows:

<h3>Future Value of $2,100 after 9 years:</h3>

N (# of periods) = 9 years

I/Y (Interest per year) = 4%

PV (Present Value) = $2,100

PMT (Periodic Payment) = $0

<u>Results:</u>

FV = $2,988.95

Total Interest $888.95

<h3>Future Value of $2,988.95 after 14 years:</h3>

N (# of periods) 14 (23 - 9)

I/Y (Interest per year) = 2%

PV (Present Value) = $2,988.95

PMT (Periodic Payment) = $0

<u>Results:</u>

FV = $3,943.86

Total Interest $954.91

Thus, the future value of the account established by the wealthy uncle will be $3,943.86 after 23 years at the two interest rates.

Learn more about future values at brainly.com/question/24703884

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6 0
2 years ago
At the end of the year, a company reports a balance in its Allowance for Uncollectible Accounts of $1,700 (debit) before any yea
iren2701 [21]

Answer:

Bad debt expense $11,320   ($283,000 × 4%)

      To Allowance for doubtful debts $11,320

(being the bad debt expense is recorded)

Explanation:

The journal entry is shown below:

Bad debt expense $11,320   ($283,000 × 4%)

      To Allowance for doubtful debts $11,320

(being the bad debt expense is recorded)

For recording this given transaction, we debited the bad debt expense as it increases the expenses account and at the same time it decreases the account receivable so the allowance would be credited so that the proper posting could be done

7 0
3 years ago
Discuss motivation hygiene theory proposed by Fredrick Hertzberg
egoroff_w [7]

Answer:

This answers may help you

6 0
3 years ago
On January 1, 2019, Tonika Company issued a five-year, $10,000, 8% bond. The interest is payable annually each December 31. The
Alex777 [14]

Answer:

So book value at the end of December will be $9676

Explanation:

We have given amount of the bond = $10000

Rate of interest = 8 %

So interest paid Interest paid = 10000×0.08 = 800

Issue price = $9611

Effective interest rate = 9 %

Interest expense = 9611×0.09= 865

Discount amortization = 865-800 = 65

Book value at the end of December 31,2019 = 9611+65 = 9676

4 0
3 years ago
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