Exam 19: Working Capital Management

Vega Music's projected net income and free cash flows are given above in thousands of dollars.Vega expects their net income and increases in net working capital to increase by 5% per year.If Vega were able to reduce its annual increase in working capital by 10% without affecting any other part of the business adversely,what would be the effect of this reduction on Vega's value,given a cost of capital of 13%?

Commercial Supply Corp.bills its accounts on terms of 2/10 net 30.The firm's accounts receivable include $200,000 that has been outstanding for ten or fewer days,$126,000 outstanding for 11 to 30 days,$98,000 outstanding for 31 to 40 days,$12,000 outstanding for 41 to 50 days,$20,000 outstanding for 51 to 60 days,and $7000 outstanding for more than 60 days.Is the aging schedule for Commercial Supply Corp.bottom heavy?

Cooper Copper,a manufacturer of copper piping,buys copper on credit on March 10.It processes this copper to make pipes on March 25 and pays cash for the copper on April 9.On April 14 it sells the pipes to a construction company,and on May 14 receives cash payment for this sale.What is the length of the cash cycle in this case?

Franklin Industries has a current net working capital of $1 million.It expects that this will grow at a rate of 3% annually forever.What growth rate in working capital would the firm require in order to achieve a $2 million increase in firm value,given that it has a cost of capital of 7%?

Use the table for the question(s)below. Luther Industries had sales of $980 million and a cost of goods sold of $560 million in 2006. A simplified balance sheet for the firm appears below: -Luther's Inventory days is closest to:

ABX corporation had sales of $47.6 million this year and an average accounts receivable of $6.3 million per day.Its credit terms specify "1/10 net 30." On average,how long does it take to collect on its sales?

The difference between a firm's operating cycle and its cash cycle is:

What is the collection float?

Which of the following would decrease a firm's cash conversion cycle?

Your firm purchases goods from its supplier with a discount of 2%,and a credit period of 30 days.If the effective annual cost of forgoing the discount is 63.49%,what is the length of the discount period?

LeokLee Industries has an average accounts payable balance of $720,000.Its average annual cost of goods sold is $8,760,000.It receives terms of 1/10 net 30 from its suppliers.Is LeokLee managing its accounts payables well?

Ally Manufacturing has an average accounts payable balance of $420,000.Its average annual cost of goods sold is $10,220,000.It receives terms of 2/15 net 30 from its suppliers.Is Ally managing its accounts payables well?

What is a firm's cash cycle?

If a supplier is offering trade credit of 1/10 net 30,and a buyer chooses not to take the discount,when should they pay,assuming that they wish to stay on good terms with the supplier?

Which of the following short-term securities would a firm invest in if they wanted to invest cash for a term of only a few days?

Brilliant Balloons,a party balloon manufacturer,buys latex on credit on September 1.It processes this latex to make balloons on September 6 and pays cash for the latex on September 14.On September 19 it sells the balloons to a party supply retailer,and on October 5 receives cash payment for this sale.What is the length of the cash cycle in this case?

A situation in which a firm runs out of inventory is called a(n):

A firm has average accounts receivable of $2 million,and,on average,takes 39 days to collect on its sales.What is the total amount of the firm's sales?

Cooper Copper,a manufacturer of copper piping,buys copper on credit on March 10.It processes this copper to make pipes on March 25 and pays cash for the copper on April 9.On April 14 it sells the pipes to a construction company,and on May 14 receives cash payment for this sale.What is the length of the operating cycle in this case?

What is the meaning of the term 2/10 net 30?