Fundamentals of Corporate Finance (4th Edition) (Berk, DeMarzo & Harford, The Corporate Finance Series)
4th Edition
ISBN: 9780134475561
Author: Jonathan Berk, Peter DeMarzo, Jarrad Harford
Publisher: PEARSON
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Textbook Question
Chapter 19, Problem 6P
The Greek Connection had sales of $32 million in 2015, and a cost of goods sold of $20 million. A simplified balance sheet for the firm appears below:
a. Calculate The Greek Connection’s net working capital in 2015.
b. Calculate the cash conversion cycle of The Greek Connection in 2015.
c. The industry average accounts receivable days is 30 days. What would have been the cash conversion cycle for The Greek Connection in 2015 had it matched the industry average for accounts receivable days (see MyFinanceLab for the data in Excel format)?
The Greek Connection
Balance Sheet as of December 31, 2015
(thousands of dollars)
| Assets | |||
| Cash | $2,000 | Accounts payable | $1,500 |
| Accounts receivable | 3,950 | Notes payable | 1,000 |
| Inventory | 1,300 | Accruals | 1,220 |
| Total current assets | $7,250 | Total current liabilities | $3,720 |
| Net plant, property, and equipment | 8,500 | Long-term debt | $3,000 |
| Total liabilities | $6,720 | ||
| Total assets | $15,750 | Common equity | $9,030 |
| Total liabilities and equity | $15,750 |
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The Greek Connection had sales of
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a. Calculate The Greek Connection's net working capital in 2013.
b. Calculate the cash conversion cycle of The Greek Connection in 2013.
c. The industry average accounts receivable days is 30 days. What would have been the cash conversion cycle for The Greek Connection in 2013 had it met the industry average for accounts receivable days? (Hint: Use a 365-day year.)
Assets Liabilities and Equity Cash $2,344 Accounts payable $1,600 Accounts receivable 4,155 Notes payable 1,000 Inventory 1,325 Accruals 1,220 Total current assets $7,824 Total current liabilities $3,820 Net plant, property, and equipment $8,500 Long-term debt $3,000 Total assets $16,324 Total liabilities $6,820 Common equity $9,504…
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Payables Deferral Period =
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If a firm has sales of $25,689,00 a year, and the average collection period for the industry is 45 days, what should this firm's accounts receivable be in the firm is comparable to the industry?
Chapter 19 Solutions
Fundamentals of Corporate Finance (4th Edition) (Berk, DeMarzo & Harford, The Corporate Finance Series)
Ch. 19 - Prob. 1CCCh. 19 - Prob. 2CCCh. 19 - Prob. 3CCCh. 19 - Prob. 4CCCh. 19 - Prob. 5CCCh. 19 - Prob. 6CCCh. 19 - Prob. 7CCCh. 19 - Prob. 8CCCh. 19 - Prob. 9CCCh. 19 - Prob. 10CC
Ch. 19 - Prob. 11CCCh. 19 - Prob. 12CCCh. 19 - Prob. 1CTCh. 19 - Prob. 2CTCh. 19 - 3. Does an increase in a firm’s cash cycle...Ch. 19 - Prob. 4CTCh. 19 - Prob. 5CTCh. 19 - Prob. 6CTCh. 19 - Prob. 7CTCh. 19 - Prob. 8CTCh. 19 - Prob. 9CTCh. 19 - Prob. 10CTCh. 19 - Which of the following short-term securities would...Ch. 19 - Prob. 1DCCh. 19 - Prob. 2DCCh. 19 - Prob. 3DCCh. 19 - Prob. 4DCCh. 19 - Prob. 5DCCh. 19 - Prob. 6DCCh. 19 - Prob. 7DCCh. 19 - Prob. 1PCh. 19 - Prob. 2PCh. 19 - Prob. 3PCh. 19 - Prob. 4PCh. 19 - Prob. 5PCh. 19 - The Greek Connection had sales of $32 million in...Ch. 19 - Assume the credit terms offered to your firm by...Ch. 19 - Prob. 8PCh. 19 - Prob. 9PCh. 19 - Prob. 10PCh. 19 - Prob. 11PCh. 19 - Prob. 12PCh. 19 - Prob. 13PCh. 19 - Prob. 14PCh. 19 - Use the financial statements supplied below and on...Ch. 19 - Prob. 16PCh. 19 - Prob. 17P
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