A COMPANY (Each question is worth 10 points - use your text to complete these) Terms A/R Net 30 days A/P Net 30 days Inventory cycle 60 days Payroll cycle Weekly P & L: Sales - COGS =GP - SGA =OP Profit 2850 1425 1425 1200 225 BALANCE SHEET Assets: Liabilities & Equity: Cash 25 N/P 100 AR 375 AP 188 Iny 375 ACC 5 CIA 775 CLTD 20 NFA 60 CL 313 Total Assets 835 LTD 222 N/W 300 TL+N/W 835 (Show all of your work - you may do this in Excel if you like) 1.) Does the Company collect?(Compute Days A/R Ch 10 page 3, compare with terms listed above) 2.) Does the Company pay? (Compute Days A/P Ch 10 page 3, compare with terms listed above) 3.) Does it control inventory? (Compute Days Inventory Ch 10 page 3, compare with terms listed above) ENT305 Cash Flow Week 1 Exercise 1 B. QUALITY INDICATORS A/R INV Terms vs. When Actually collected Anyone can sell; can they collect? 30 days really equals 35-40 days Too long: bad management Too short: harassing customers Inventory Cycle vs. Actual Days on Hand Too short stock-outs : Too long: cannot get to cash Terms vs. Actual Days Too long: suppliers will cut-off Too short: COD or discounts A/P ACC INV Game Payment Cycle vs. Actual Days Wages + Taxes + Interest Skewed days if interest is included 7-15 days is normal COGS/Sales vs. Days Inventory If COGS/Sales rises and days inventory falls, hidden profits If COGS/Sales falls and days inventory rises, pretend profits General Rule: Inventory