Fundamentals Of Financial Management, Concise Edition (mindtap Course List)
10th Edition
ISBN: 9781337902571
Author: Eugene F. Brigham, Joel F. Houston
Publisher: Cengage Learning
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Question
Chapter 15, Problem 7P
a.
Summary Introduction
To Determine: The cash conversion cycle of Corporation C.
The cash conversion cycle is a cash flow estimation that endeavours to quantify the time it takes an organization to change over its investment in inventory and other asset contributions to money.
b.
Summary Introduction
To Determine: The total assets turnover and
c.
Summary Introduction
To Determine: The cash conversion cycle, total assets turnover and ROA for 2019.
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Chastain Corporation is trying to determine the effect of its inventory turnover ratio and days sales outstanding (DSO) on its cash conversion cycle. Chastain's 2019 sales (all on credit) were $189,000, its cost of goods sold is 80% of sales, and it earned a net profit of 4%, or $7,560. It turned over its inventory 7 times during the year, and its DSO was 38 days. The firm had fixed assets totaling $47,000. Chastain's payables deferral period is 50 days. Assume 365 days in year for your calculations.
Calculate Chastain's cash conversion cycle. Do not round intermediate calculations. Round your answer to two decimal places. days
Assuming Chastain holds negligible amounts of cash and marketable securities, calculate its total assets turnover and ROA. Do not round intermediate calculations. Round your answers to two decimal places.
Total assets turnover:
ROA:
%
Suppose Chastain's managers believe that the inventory turnover can be raised to 9.6 times. What…
Chastain Corporation is trying to determine the effect of itsinventory turnover ratio and days sales outstanding (DSO) on its cash conversion cycle.Chastain’s 2018 sales (all on credit) were $121,000, its cost of goods sold is 80% of sales, andit earned a net profit of 2%, or $2,420. It turned over its inventory 7 times during the year,and its DSO was 37 days. The firm had fixed assets totaling $42,000. Chastain’s payablesdeferral period is 35 days.a. Calculate Chastain’s cash conversion cycle.b. Assuming Chastain holds negligible amounts of cash and marketable securities, calculateits total assets turnover and ROA.
c. Suppose Chastain’s managers believe that the inventory turnover can be raised to 9.9times. What would Chastain’s cash conversion cycle, total assets turnover, and ROAhave been if the inventory turnover had been 9.9 for 2018?
Cash conversion cycle
Christie Corporation is trying to determine the effect of its inventory turnover ratio and days sales outstanding (DSO) on its cash conversion cycle. Christie's 2012 sales (all on credit) were
$287,000; its cost of goods sold is 80% of sales; and it earned a net profit of 8%, or $22,960. It tumed over its inventory 5 times during the year, and its DSO was 39 days. The firm had fixed
assets totaling $40,000. Christie's payables deferral period is 50 days. Assume 365 days in year for your calculations.
a. Calculate Christie's cash conversion cyde. Round your answer to two decimal places.
days
b. Assuming Christie holds negligible amounts of cash and marketable securities, calculate its total assets turnover and ROA. Round your answer to two decimal places.
Total assets
ROA
t. Suppose Christle's managers belleve that the inventory turnover can be raised to 8.4 times. What would Christie's cash conversion cyde, total assets turnover, and ROA have been iF the
Inventory…
Chapter 15 Solutions
Fundamentals Of Financial Management, Concise Edition (mindtap Course List)
Ch. 15 - What are some pros and cons of holding high levels...Ch. 15 - Prob. 2QCh. 15 - Prob. 3QCh. 15 - Prob. 4QCh. 15 - What are the four key factors in a firms credit...Ch. 15 - Prob. 6QCh. 15 - Why is some trade credit called free while other...Ch. 15 - Prob. 9QCh. 15 - Indicate using a (+), (), or (0) whether each of...Ch. 15 - Prob. 1P
Ch. 15 - Prob. 2PCh. 15 - COST OF TRADE CREDIT AND BANK LOAM Lancaster...Ch. 15 - CASH CONVERSION CYCLE Zane Corporation has an...Ch. 15 - RECEIVABLES INVESTMENT McEwan Industries sells on...Ch. 15 - WORKING CAPITAL INVESTMENT Pasha Corporation...Ch. 15 - Prob. 7PCh. 15 - CURRENT ASSETS INVESTMENT POLICY Rentz Corporation...Ch. 15 - LOCKBOX SYSTEM Fisher-Gardner Corporation (FGC)...Ch. 15 - CASH BUDGETING Helen Bowers, owner of Helens...Ch. 15 - Prob. 12IC
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