1. AZ Inc. had credit sales of $6,500,000 last year and its days sales outstanding was DSO = 50 days. What was its average receivables balance, based on a 365-day year?
2. Firm Q has $350 million of sales, $60 million of inventories, $70 million of receivables, and $45 million of payables. Its cost of goods sold is 75% of sales. Calculate its current cash conversion cycle based on the available information.
3. Estimate the cash conversion cycle based on the following available information. Revenue = $235 million Cost of goods sold = $211.5 million Account receivables = $65 million Inventories = $100 million Account payables = $80 million
4. A company has a days sales outstanding (DSO) of 80 days (on a 365-day basis per year). All sales are on credit. It has an account receivable of $120 million and inventory of $150 million. a) What is the inventory turnover ratio? b) If the payables deferral period is 65 days, what is the length of the cash conversion cycle?
5. NCB Corp’s budgeted monthly sales are $100,000, and they are expected to be constant every month. 30% of its customers pay in the first month and take the 2% discount, while the remaining 70% pay in the month following the sale and do not receive a discount. The firm has no bad debts. Purchases for next month’s sales are constant at 50% of projected sales for the next month. Other payments (e.g. utilities, wages, rent, and taxes) are 30% of sales for the current month. Construct a cash budget for a typical month and calculate the average cash gain or loss during the month.