Question
In: Accounting
Ridgill industries currently has $51,500 in cash, $60,000 in accounts receivable, $63,750 in inventories, $21,500 in...
Ridgill industries currently has $51,500 in cash, $60,000 in accounts receivable, $63,750 in inventories, $21,500 in accrued liabilities, and $90,000 in accounts payable on its balance sheet. The firm’s production manager has determined that cost of goods sold accounts for 75% of the sales revenue produced where Ridgill’s sales are $456,250.
Ridgill’s CFO is interested in determining the length
of time funds are tied up in working capital. Use the information
given above to answer the following questions. (Note, Use 365 days
as the length of a year in all calculations, and round all values
to two decimal places.)
1. What is Ridgill’s inventory conversion period?
*
20 days
48 days
68 days
96 days
None of the above
2. What is Ridgill’s average collection period?
*
20 days
48 days
68 days
96 days
None of the above
3. What is Ridgill’s payable deferral period?
*
20 days
48 days
68 days
96 days
None of the above
4. What is the length of the firm’s cash conversion
cycle? *
20 days
48 days
68 days
96 days
None of the above
5. Assume Ridgill’s CFO wants to decrease the cash
conversion cycle by 10 days, based on a 365-day year. He believes
he can reduce the average inventory to $59,000 with no effect on
sales and payables. By how much must the firm also reduce its
accounts receivable to meet its goal in the reduction of the cash
conversion cycle? *
$6,162.5
$53,837.5
$60,000
$59,000
None of the above
Solutions
ekkarill92 answered 2 years agoRelated Solutions
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