Why are accruals called spontaneous sources of funds
15-9    Why are accruals called spontaneous sources of funds, what are their costs, and why don’t firms use more of them?
15-10    Indicate using a (+), (–), or (0) whether each of the following events would probably cause accounts receivable (A/R), sales, and profits to increase, decrease, or be affected in an indeterminate manner
A/R        Sales       Profit
 The firm tightens its credit standards.          The terms of trade are changed from
 2/10, net 30, to 3/10, net 30.           Â
The terms are changed from
 2/10, net 30, to 3/10, net 40.             The credit manager gets tough with
  past due accounts.
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CASH CONVERSION CYCLE Primrose Corp has $15 million of sales, $2 million of inventories, $3 million of receivables, and $1 million of payables. Its cost of goods sold is 80% of sales, and it finances working capital with bank loans at an 8% rate. What is Primrose’s cash conversion cycle (CCC)? If Primrose could lower its inventories and receivables by 10% each and increase its payables by 10%, all without affecting sales or cost of goods sold, what would be the new CCC, how much cash would be freed up, and how would that affect pre-tax profits?
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Answers
Status NEW
Posted 06 May 2017 02:05 PM
My Price 10.00
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file 1494081475-1335217_1_636295484024138713_cash-conversion-cycle.xlsx preview (639 words )
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