The Herb Salter Corporation is considering a plant expansion that will increase its sales and net income. The following data represent management's estimate of the impact the proposal will have on the company:
Curren
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The Herb Salter Corporation is considering a plant expansion that will increase its sales and net income. The following data represent management's estimate of the impact the proposal will have on the company:
Current Proposed
Cash $ 120,000 $ 140,000
Accounts payable 360,000 450,000
Accounts receivable 400,000 550,000
Inventory 360,000 420,000
Marketable securities 180,000 180,000
Mortgage payable (current) 160,000 310,000
Fixed assets 2,300,000 3,200,000
Net income 400,000 550,000
The effect of the plant expansion on Salter's working capital will be a(n)
A. Increase of $240,000 C. Increase of $230,000
B. Decrease of $10,000 D. Increase of $10,000
.Wildthing Amusement Company’s total assets fluctuate between $320,000 and $410,000, while its fixed assets remain constant at $260,000. If the firm follows a maturity matching or moderate working capital financing policy, what is the likely level of its long-term financing?
a. $ 90,000 d. $410,000
b. $260,000 e. $320,000
c. $350,000
65. If the firm was to shift $3,000 of current assets to fixed assets, the firm's net working capital would _____, the annual profits on total assets would _____, and the risk of technical insolvency would _____, respectively.
A. increase; decrease; increase C. increase; decrease; decrease
B. decrease; increase; decrease D. decrease; increase; increase
If the firm was to shift $2,000 of current liabilities to longterm funds, the firm's net working capital would _____, the annual cost of financing would _____, and the risk of technical insolvency would _____, respectively.
A. decrease; decrease; increase C. decrease; increase; decrease
B. increase; increase; decrease D. increase; decrease; decrease
. Porta Stadium Inc. has annual sales of $40,000,000 and keeps average inventory of $10,000,000. On average, the firm has accounts receivable of $8,000,000. The firm buys all raw materials on credit, its trade credit terms are net 30 days, and it pays on time. The firm’s managers are searching for ways to shorten the cash conversion cycle. If sales can be maintained at existing levels but inventory can be lowered by $2,000,000 and accounts receivable lowered by $1,000,000, what will be the net change in the cash conversion cycle? Use a 360-day year
a. +105 days d. -27 days
b. -105 days e. -3 days
c. +27 days
. Bully Corporation purchases raw materials on July 1. It converts the raw materials into inventory by September 30. However, Bully pays for the materials on July 20. On October 31, it sells the finished goods inventory. Then, the firm collects cash from the sale 1 month later on November 30. If this sequence accurately represents the average working capital cycle, what is the firm's cash conversion cycle in days?
A. 92 days. C. 123 days.
B. 133 days D. 153 days.
A firm has a cash conversion cycle of 60 days. Annual outlays are $12 million and the cost of negotiated financing is 12 percent. If the firm reduces its average age of inventory by 10 days, the annual savings is ______.
A. $104,000 C. $ 28,800
B. $144,000 D. $40,000
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