![]() ![]() However, bad debts losses on the incremental sales would be 3%. ![]() The manager intends to extend the credit term to 45 days which will increase sales to P5.75 million. Its credit period and average collection period are both 30 days, and 1.5% of its sales end as bad debts. If firm’s pays 14% for these resources, by how much would it increase its annual profits by favorably changing its current cash conversion cycle by 20 days? 4. How much in resources must be invested to support its cash conversion cycle? c. Calculate the firm’s daily cash operating expenditure. Calculate the firm’s operating and cash conversion cycles. The firm’s total annual outlays for operating-cycle investment are 3.5 million. Camp Manufacturing turns over its inventory 8 times each year, has average payment period of 35 days, and has an average collection period of 60 days. What is the expected return on equity under each current asset level? Assume a 40 Percent tax rate. ![]() The firm expects to generate earning before interest and taxes at an rate of 12 percent on total sales. Three alternatives regarding the projected current assets level are available to the firm: (1) a tight policy requiring current assets of only 45 percent of projected sales (2) A moderate policy of 50 percent in sales in current assets, and (3) a relaxed policy requiring current assets of 60 percent of sales. Rein’s interest cost is currently 8 percent on both short-term and longer term debt (which the firm uses in its permanent structure). Fixed assets total P1 million, and the firm wishes to maintain a 60percent debt ratio. Management expects sales to increase to approximately P2 million as a result of an assets expansion presently being undertaken. The Rein Corporation is attempting to determine the optimal level of current assets for the coming year. Compute the annual cost of cash based on optimal transaction size. What will be Salado’s average cash balance? c. ![]() What is the optimal transaction size of transfer from marketable securities to cash? b. The firm’s marketable securities are invested to earn 10 percent, and the cost per transaction of converting securities to cash P25 a. Saludo plans to meet its cash requirements by periodically selling marketable securities from its portfolio. Saludo Company project that cash outlays of P 36 million will occur uniformly through out the year. However, now assume that the company pays no dividends.Exercise 4 – Working Capital Management Cash Assistant Professor Ron Reyes Final Exercise 2 –Management of Receivables and Inventories 1. Refer to problem above and assume that the company had $ 3 \$ 3 $3 million in assets at the end of 2015 2015 2015. Under these assumptions, what additional funds would be needed for the coming year? Why is this AFN different from the one you found in problem above? However, now assume that the company pays no dividends. Use the AFN equation to forecast the additional funds Carter will need for the coming year. Its profit margin is forecasted to be 5 % 5 \% 5%, and the forecasted retention ratio is 30 % 30 \% 30%. Carter is at full capacity, so its assets must grow in proportion to projected sales. Its assets totaled $ 3 \$ 3 $3 million at the end of 2015 2015 2015. ![]()
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