Working Capital Cash Flow Cycle

Strickler Technology is considering changes in its working capital policies to improve its cash flow cycle. Strickler's sales last year were $2,700,000 (all on credit), and its net profit margin was 4%. Its inventory turnover was 7.5 times during the year, and its DSO was 44 days. Its annual cost of goods sold was $1,500,000. The firm had fixed assets totaling $430,000. Strickler's payables deferral period is 50 days. Assume 365 days in year for your calculations. Do not round intermediate calculations.

1. Calculate Strickler's cash conversion cycle. Round your answer to two decimal places.
        days
   
2. Assuming Strickler holds negligible amounts of cash and marketable securities, calculate its total assets turnover. Round your answer to two decimal places.
        x
   Calculate its ROA. Round your answer to two decimal places.
        %
   
3. Suppose Strickler's managers believe the annual inventory turnover can be raised to 11 times without affecting sale or profit margins. What would Strickler's cash conversion cycle have been if the inventory turnover had been 11 for the year? Round your answer to two decimal places.
        days
   What would Strickler's total assets turnover have been if the inventory turnover had been 11 for the year? Round your answer to two decimal places.
         x
   What would Strickler's ROA have been if the inventory turnover had been 11 for the year? Round your answer to two decimal places.
        %

Changes in Accounting Principle

Gaubert Inc. decided in March 2017 to change from FIFO to weighted-average inventory pricing. The company reported 2017 income as $30,000. Gaubert’s pre-tax income, using the new weighted-average method in 2015 would have been $35,000 ($5k higher than reported).

In 2016, if the new inventory method had been used, Income would have been $27,000 ($3k higher than reported).

What is the proper disclosure of this event?

Changes in Accounting Estimate

Arcadia HS, purchased equipment for $510,000 which was estimated to have a useful life of 10 years with a salvage value of $10,000 at the end of that time. Depreciation has been recorded for 7 years on a straight-line basis. In 2017 (year 8), it is determined that the total estimated life should be 15 years with a salvage value of $5,000 at the end of that time.

Calculate the depreciation expense for 2017

Correction of Errors

In 2018, Hillsboro Co. determined that it incorrectly overstated its accounts receivable and sales revenue by $100,000 in 2017. In 2018, what is the adjusting journal entry in order to correct for this error (ignore income taxes)?

Compensation Changes at JC Penney

Having been in business for over 100 years, JC Penney has experienced highs and lows in organizational performance. In the past decade the firm has faced a dramatically changing retail

environment from competitors such as Target, Wal-Mart, the Gap, and others. As a result, JC

Penney was increasingly viewed by customers and analysts of the retail industry as lagging in its merchandising strategies.

Even the compensation system at JC Penney was viewed as traditional and paternalistic in nature because it emphasized rewarding employees primarily for their length of service. Also, most promotions were made internally, which created a more static organizational culture. The traditional pay structure at the firm contained many pay grades and was based on job evaluations to establish those grades. Its performance review system emphasized employee tenure and effort to a greater degree than performance results.

To respond to the competitive environment, the firm’s executives decided that JC Penney had to become more dynamic and able to change more quickly. One of the changes identified was that a new compensation system was needed. The restructured compensation system that was developed and implemented focused heavily on market value, using pay survey data that specifically matched job responsibilities. The greatest change was the development of “career bands.” These career bands grouped jobs together based on survey data and job responsibilities and resulted in fewer grades with wider ranges. The career bands represented a broadbanding approach that was based on benchmark jobs for which market pricing data were available. Jobs

for which market data could not be found were analyzed using a job evaluation system.

Use of the career bands was designed to identify career paths for employees throughout the company and to better link compensation to all of the jobs. By having career bands, greater flexibility was provided for employees to be rewarded for both current performance and continuing

career growth. To support this new compensation system, a revised performance management

system was developed. This system used performance goals and measures more closely tied to

business strategies and objectives. Important to implementing the new performance management

system was managerial training. This training was needed so that the managers could use the

new system effectively and to describe to employees the importance of performance and its link to compensation.

Implementation of the new compensation system required extensive communication.

Newsletters were prepared for all managers explaining the new compensation system. Then

departmental and store meetings were held with managers and employees to describe the new system. A number of printed materials and videos discussing the importance of the new compensation plan were prepared and utilized. A final part of communications was to prepare letters for individual employees that informed them about their job band and market pay range.

summarize please

During June, the following changes in inventory item 27 took place:

            June   1     Balance                         1,400 units @ £24

                    14     Purchased                        900 units @ £36

                    24     Purchased                        700 units @ £30

                      8     Sold                                 400 units @ £50

                    10     Sold                              1,000 units @ £40

                    29     Sold                                 500 units @ £44

Perpetual inventories are maintained in units only.

Instructions

What is the cost of the ending inventory for item 27 under the following methods? (Show calculations.)

(a)   FIFO.

(b)   Average Cost.

Answer Briefly:

A. During what period in the past 30 years were realized real rates of return negatives? What causes negative realized real rates of return?

B. Explain why interest move with changes in inflation.

Suppose that the one-day VaR with a confidence level of 95% is 1.5 million. Using the assumption that the distribution of portfolio value changes is normal with mean zero, the one-day 99% VaR, the 10-day VaR and the 250- day VaR

The statement of stockholder's equity differs from the statement of retained earnings in that the statement of stockholders' equity:

a. shows the effect of dividends declared.

b. contains net income.

c. contains the changes in contributed capital.

d. contains a liability section.

Select a product you are familiar with. Based on your knowledge of the product life cycle, what types of changes will occur to your selected product as it continues through the product life cycle? How will this affect the marketing of your selected product?

Select a product you are familiar with. Based on your knowledge of the product life cycle, what types of changes will occur to your selected product as it continues through the product life cycle? How will this affect the marketing of your selected product?