Week 9 Finance Assignment
FIN 100 – Principles of Finance
Scenario:
Apply financial formulas to assess operating cycles and financing needs.
Assignment Instructions / Questions:
1. Calculate the firm’s operating and cash conversion cycles.
2. Estimate average investments in receivables, inventories, and payables.
3. Evaluate net financing needs.
4. Compare trade credit costs with bank loan interest rates.
Deliverables:
A problem-solving assignment with financial calculations and recommendations.
, Pretty Lady Cosmetics has an average production process of forty days. Finished
goods are kept on hand for an average of 15 days before they are sold. Accounts
receivable are outstanding an average of 35 days, and the firm receives 40 days of
credit on its purchases from suppliers.
A. Estimate the average length of the firm’s short-term operating cycle. How
often would the cycle turn over in a year?
Cash conversion cycle= account receivable period+ inventory period-credit on
purchases
CCC = 15+35-40 = 10 days
operating cycle = account receivable period+
inventory period
35 days + 15 days = 50days
365 days/ 50days = 7.3 days
B. Assume net sales of $1,200,000 and cost of goods sold of $900,000.
Determine the average investment in accounts receivable, inventories and
accounts payable. What would be the net financing need considering only
those accounts
FIN 100 – Principles of Finance
Scenario:
Apply financial formulas to assess operating cycles and financing needs.
Assignment Instructions / Questions:
1. Calculate the firm’s operating and cash conversion cycles.
2. Estimate average investments in receivables, inventories, and payables.
3. Evaluate net financing needs.
4. Compare trade credit costs with bank loan interest rates.
Deliverables:
A problem-solving assignment with financial calculations and recommendations.
, Pretty Lady Cosmetics has an average production process of forty days. Finished
goods are kept on hand for an average of 15 days before they are sold. Accounts
receivable are outstanding an average of 35 days, and the firm receives 40 days of
credit on its purchases from suppliers.
A. Estimate the average length of the firm’s short-term operating cycle. How
often would the cycle turn over in a year?
Cash conversion cycle= account receivable period+ inventory period-credit on
purchases
CCC = 15+35-40 = 10 days
operating cycle = account receivable period+
inventory period
35 days + 15 days = 50days
365 days/ 50days = 7.3 days
B. Assume net sales of $1,200,000 and cost of goods sold of $900,000.
Determine the average investment in accounts receivable, inventories and
accounts payable. What would be the net financing need considering only
those accounts
