Question

A) Tenaga Berhad wishes to evaluate its cash conversion cycle (CCC). Research done by one of the firm’s financial analysts indicates that on average the firm holds items in inventory for 55 days, pays its suppliers 35 days after purchase, and collects its receivables after 45 days. The firm’s annual sales (all on credit) are about RM1.5 billion, its cost of goods sold represent about 60 percent of sales, and purchases represent about 40 percent of cost of goods sold. Assume a 365-day year. Calculate Tenaga Berhad’s operating cycle (OC) and cash conversion cycle (CCC).

B) Explain the advantages of raising funds through combination of various sources of financing instead of using just one source of financing.

C) Neelofah is 30 years old and is saving for her retirement. She is planning on making 36 contributions to her retirement account of the next 36 years. The first contribution will be made today (t = 0) and the final contribution will be made 35 years from today. The retirement account will earn a return of 10 percent a year. If each contribution she makes is RM3,000, how much will be in the retirement account 35 years from now?

D) Your monthly statement from your bank credit card shows that the monthly rate of interest is 1.5%. What is the effective annual rate of interest you are being charged on your credit card?

Answer 1