Winston Inc. is trying to determine the effect of its inventory turnover ratio and days sales outstanding on its cash conversion cycle. Winston's 2015 sales (all on credit) were $171,000 and its cost of goods sold was 75% of sales. It turned over its inventory 8.5 times during the year. Its
Quantitative Problem: Winston Inc. is trying to determine the effect of its inventory turnover ratio and days sales outstanding on its cash conversion cycle. Winston's 2015 sales (all on credit) were $171,000 and its cost of goods sold was 75% of sales. It turned over its inventory 8.5 times during the year. Its receivables balance at the end of the year was $13,118.67 and its payables balance at the end of the year was $7,403.9. Using this information calculate the firm's cash conversion cycle. Do not intermediate calculations. Round your answer to the nearest whole number.
How many days?
Quantitative Problem: Adams Manufacturing Inc. buys $9.1 million of materials (net of discounts) on terms of 2/10, net 50; and it currently pays after 10 days and takes the discounts. Adams plans to expand, which will require additional financing. If Adams decides to forgo discounts, how much additional credit could it obtain? Assume 365 days in year for your calculations. Do not round intermediate calculations. Round your answer to the nearest cent.
$
What would be the nominal and effective cost of such a credit? Assume 365 days in year for your calculations. Do not round intermediate calculations. Round your answer to two decimal places.
Nominal cost: %
Effective cost: %
If the company could receive the funds from a bank at a rate of 9%, interest paid monthly, based on a 365-day year, what would be the effective cost of the bank loan? Do not round intermediate calculations. Round your answer to two decimal places.
%
Should Adams use bank debt or additional trade credit?
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