FIN 515 Managerial Finance Week 7
Problem Set
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Answer the following questions and
solve the following problems in the space provided. When you are done, save the
file in the format flastname_Week_7_Problem_Set.docx (where flastname is your
first initial and your last name), and submit it to the appropriate Dropbox.
Chapter 26 (page 903):
1. Answer the following questions:
a. What is the difference
between a firm’s cash cycle and its operating cycle?
b. How will a firm’s cash cycle
be affected if a firm increases its inventory, all else being equal?
c. How will a firm’s cash cycle
be affected if a firm begins to take the discounts offered by its suppliers,
all else being equal?
4. The Greek Connection had sales of $32 million in 2012, and a
cost of goods sold of $20 million. A simplified balance sheet for the firm
appears below:
a. Calculate The Greek
Connection’s net working capital in 2012.
b. Calculate the cash
conversion cycle of The Greek Connection in 2012.
c. The industry average
accounts receivable days is 30 days. What would the cash conversion cycle for
The Greek Connection have been in 2012 if it had matched the industry average
for accounts receivable days?
5. Assume the credit terms offered to your firm by your
suppliers are 3/5, Net 30. Calculate the cost of the trade credit if your firm
does not take the discount and pays on day 30.
Chapter 27 (page 925):
1.
Which of the following companies are likely to have high short-term financing
needs? Why?
a. A clothing retailer
b. A professional sports team
c. An electric utility
d. A company that operates toll
roads
e. A restaurant chain
2.
Sailboats Etc. is a retail company specializing in sailboats and other
sailing-related equipment. The following table contains financial forecasts as
well as current (month 0) working capital levels. During which months are the
firm’s seasonal working capital needs the greatest? When does it have surplus
cash?
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