Question

Case 1: You are the Receivable Manager

You are analyzing your receivable for the period and you are concerned that the average collection period is lengthening. What specific actions can you take to reduce the average collection period?

Mention at least three actions.

Case 2: You are the Operations Manager

You are analyzing your inventory turnover report for the month and are concerned that the average days inventory outstanding is lengthening. What actions can you take to reduce average days inventory outstanding?

Mention at least three actions.

Case 3: You Are the Chief Financial Manager

Assume that you are the CFO of a company that has a larg investment in plant assets and it sells its products on credit. Identify steps you can take to increase your company’s cash flow and, hence, your company’s firm value.

Mention at least 4 steps

Answer 1

Case 1:- Specific actions one can take to reduce the average collection period are:-

1. You can avoid this wait time by utilizing a postal box and giving your mail pick-up personnel a key to the box and authority to make deposits in your bank.

2. In the event that you need to pay your costs before you get cash from clients, that period is known as a "skim." The arrangement is to alter your terms with the goal that you have longer to pay thus that you give your clients less an ideal opportunity to pay.

3.If you set up direct deposit with your customers, they can transfer money to your bank directly from their respective accounts, which will ultimately reduce bank processing time. Easily set up a bank account that allows for automated clearing house payments.

Case 2:-  Set of actions you can take to reduce average days inventory outstanding are:-

1. The better you are at determining what clients will need and when they will need it, the less products you have to keep in stock and the higher your stock turnover ratio will be and reduced average days inventory outstanding. Put frameworks set up that will accumulate genuine data about what sells. Inventory software will gather deals data and can assist with examining past deals information to decide occasional patterns and provide better determining of future interest.

2.A focused, well-designed and cost-appropriate marketing campaign will definately result in increased sales and reduce average days inventory. Marketing campaigns could focus on ads or promotional events and unique offers and ought to be observed and estimated to guarantee an effective rate of profitability.

3.Purchasing stock needs to be in line with demand. Utilizing Pareto 80:20 principle, invest mainly in the 20 percent of items that procure 80 percent of the benefit. Eliminate products with lower turnover ratios to reduce average days inventory.

Case 3:- Steps you can take to increase your company’s cash flow and, hence, your company’s firm value are:-

1.Since leasing supplies, equipment, andland typically winds up being more costly than purchasing, doing so may seem strange to somebody who is just focusing on the bottom line, or your income after costs are paid off. Be that as it may, except if your organization is flush with money, you're going to need to keep up a money stream for everyday activities.

2.Everybody loves an incentive, and if you offer clients a discount if they pay their bills ahead of time, you’re creating a you're making a success/win circumstance for both of you. Getting the money in early enables your cash flow to stream, obviously.

3..If a client wouldn't like to pay you in cash, at that point make certain to lead a credit check—particularly before you sign them up. On the off chance that the customer has helpless credit, you can securely expect that you won't get installments on schedule.

4.On paying electronically, one can wait until the morning of the day a bill is due to make payment. This purchasing of time improves your income. You can additionally utilize a business credit card as some offer a grace period up to 21 days, which can do a great deal to expand your cash flow. You might even get cash back.