Question

In: Accounting

Exercise 1) - Procurement impact on economic performance Consider the following data: Income statement: Purchases: 1,000...

Exercise 1) - Procurement impact on economic performance

Consider the following data:

Income statement:

Purchases: 1,000 €

EBIT: 280 €

No other costs

Balance Sheet:

Total Assets: 2,000 €

Inventory: 700 €

Question: How much ROA changes by reducing 5% cost of purchases?

Exercise 2) - Procurement impact on financial performance

Consider the following situation:

A supermarket buys shampoo from a supplier and keeps it on the shelf about one week before the customer buys it

Customers pay cash or via credit card, so the average payment time from customers is two weeks

The supermarket pays suppliers eight weeks after the purchase

Question: What is the value of the C2C (or Cash-to-Cash or Cash-Generation-Cycle)?

Solutions

Expert Solution

Exercise 1.
ROA = Net income/ Total Assets
          = 280/2000
          = 0.14
          = 14%
If cost of purchase reduce by 5%
Cost of purchases = 1000-(1000x5%)
                                     = 950
Increase in EBIT = 280+50
                                 = 330
Inventory = 700-35
                     = 665
Total Assets = 2000-700+665
                          = 1965
ROA = 330/1965
          = 0.1679
          = 16.79%
ROA will increase by 2.79% by reducing 5% cost of purchases.
Exercise 2.
C2C = Days inventory on hand + Days sales outstanding - Days payable outstanding
        = one week + two weeks - eight weeks
        = -five weeks
this means a company can easily pay off its outstanding 5 weeks after receiving it.
A negative C2C is a good thing.

ekkarill92 answered 2 years ago
Next > < Previous

Related Solutions

Consider the following income statement data from the Ross Company:
  Common-Size Income StatementsConsider the following income statement data from the Ross Company:   2013 2012 Sales revenue $527,000 $452,000 Cost of goods sold 338,000 281,000 Selling expenses 107,000 101,000 Administrative expenses 60,000 54,000 Income tax expense 7,800 5,400 Prepare common-size income statements for each year. Round percentages to one decimal point. ROSS COMPANYCommon-Size Income Statements(Percent of Sales Revenue)   2013 2012     Sales Revenue Answer   % Answer   %     Cost of Goods Sold Answer  ...
Consider the following income statement data from the Ross Company:
  Common-Size Income StatementsConsider the following income statement data from the Ross Company:   2013 2012 Sales revenue $527,000 $452,000 Cost of goods sold 338,000 281,000 Selling expenses 107,000 101,000 Administrative expenses 60,000 54,000 Income tax expense 7,800 5,400 Prepare common-size income statements for each year. Round percentages to one decimal point. ROSS COMPANYCommon-Size Income Statements(Percent of Sales Revenue)   2013 2012     Sales Revenue Answer% Answer%     Cost of Goods Sold Answer% Answer%     Answer  ...
Data $Billions Government purchases of goods 1,000 Payments of factor income to the rest of the...
Data $Billions Government purchases of goods 1,000 Payments of factor income to the rest of the world 60 Imports 250 Change in business inventories 40 Durable goods 250 Nondurable goods 650 Exports 150 Residential investment 150 Local government purchases 350 Depreciation 60 Receipts of factor income to the rest of the world 80 Indirect taxes 70 Subsidies 30 Determine: By showing calculation i)                The value of Gross Private Domestic Investment ii)              The value of GDP using the Expenditure approach iii)             The value of...
A procurement manager has been tracking delivery performance of her suppliers. Based on the following data...
A procurement manager has been tracking delivery performance of her suppliers. Based on the following data 1. Calculate sigma performance of these suppliers using Z Score tables and rank order them 2. Comment on the performance of these suppliers Supplier A B C Number of deliveries 25 54 70 Number of late deliveries 3 10 12 .
Alpha Company provided the following data concerning its income statement: sales, $1,025,000; purchases, $500,000; beginning inventory,...
Alpha Company provided the following data concerning its income statement: sales, $1,025,000; purchases, $500,000; beginning inventory, $260,000; ending inventory, $242,000; operating expenses, $93,000; freight-in, $5,000; sales discounts, $27,000; purchases discounts, $15,000; sales returns & allowances, $95,000; and purchases returns & allowances, $38,000. The data are complete and provide the basis for preparation of an income statement. How much is net income?
Foreign exchange impact on the income statement
Foreign exchange impact on the income statement
Common-Size Income Statements Consider the following income statement data from the Ross Company: 2013 2012 Sales...
Common-Size Income Statements Consider the following income statement data from the Ross Company: 2013 2012 Sales revenue $529,000 $454,000 Cost of goods sold 336,000 279,000 Selling expenses 105,000 99,000 Administrative expenses 64,000 58,000 Income tax expense 11,800 9,400 Prepare common-size income statements for each year. Note: Round answers to one decimal place (ex: 0.2345 = 23.5%). ROSS COMPANY Common-Size Income Statements (Percent of Sales Revenue) 2013 2012 Sales Revenue Answer Answer Cost of Goods Sold Answer Answer AnswerGross Profit on...
Consider the following income statement for the Heir Jordan Corporation:    HEIR JORDAN CORPORATION Income Statement...
Consider the following income statement for the Heir Jordan Corporation:    HEIR JORDAN CORPORATION Income Statement   Sales $ 42,000   Costs 32,800   Taxable income $ 9,200   Taxes (24%) 2,208   Net income $ 6,992       Dividends $ 2,503       Addition to retained earnings 4,489    The balance sheet for the Heir Jordan Corporation follows.    HEIR JORDAN CORPORATION Balance Sheet Assets Liabilities and Owners’ Equity   Current assets   Current liabilities     Cash $ 3,150     Accounts payable $ 2,400     Accounts receivable 4,500     Notes payable 4,300     Inventory 6,400...
Consider the following income statement for the Heir Jordan Corporation:    HEIR JORDAN CORPORATION Income Statement...
Consider the following income statement for the Heir Jordan Corporation:    HEIR JORDAN CORPORATION Income Statement   Sales $ 43,800   Costs 34,800   Taxable income $ 9,000   Taxes (21%) 1,890   Net income $ 7,110       Dividends $ 2,518       Addition to retained earnings 4,592    The balance sheet for the Heir Jordan Corporation follows.    HEIR JORDAN CORPORATION Balance Sheet Assets Liabilities and Owners’ Equity   Current assets   Current liabilities     Cash $ 2,700     Accounts payable $ 2,400     Accounts receivable 3,500     Notes payable 5,400     Inventory 9,000...
Consider the following income statement for the Heir Jordan Corporation:    HEIR JORDAN CORPORATION Income Statement...
Consider the following income statement for the Heir Jordan Corporation:    HEIR JORDAN CORPORATION Income Statement   Sales $ 48,800   Costs 34,800   Taxable income $ 14,000   Taxes (30%) 4,200   Net income $ 9,800       Dividends $ 3,200       Addition to retained earnings 6,600    The balance sheet for the Heir Jordan Corporation follows. Based on this information and the income statement, supply the missing information using the percentage of sales approach. Assume that accounts payable vary with sales, whereas notes payable do not....
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT