Cash management is a very important function of managers. Companies need to manage their operations in a way that they can sustain growth and yet not run out of cash. Consider the case of the Red Hamster Manufacturing Corporation:
Cash management is a very important function of managers, Companies need to manage their operations in a way that they can sustain growth and vet not run out of cash. Consider the cese of the Red Hamster Manufacturing Corporation: Red Hamster Manufacturing Corporation has forecasted sales of $29,000,000 for next year and expects its cost of goods sold (CoGS) to remain at 80% of sales. Currently, the firm holds $3,100,000 in inventories, $1,800,000 in accounts receivabie, and $2,800,000 in accounts payable. Approximately how long does it take Red Hamster Manufacturing to convert its raw materials to its finished products and then to seil those goods? (Note: Use 365 days as the length of year in all calculations, and round all values to two decimal places.) 41.45 days 48.77 days 46.33 days 39.02 days On averoge, it takes from the time a sale is made until the time cash is collected from customers. Red Hamster Manufacturing relies on customer credit when it buys raw materials from its suppliers. On averese, it takes firm purchases materials before it sends cash to its suppliers. The length of Red Hamster Manufocturingls cash conversion cycle (CCC) is On average, it takes from the time a sale is made until the time cash is collected from customers. Red Hamster Manufacturing relies on customer credit when it buys raw materials from its suppliers, On average, it takes after the firm purchases materials before it sends cash to its suppliers. The length of Red Hamster Manufacturing's cash conversion cycle (CCC) is in general, firms prefer a ccC. What is the length of Red Hamster Manufacturing's cash conversion cycle (CCC)? 31.49 days 28.75 days 26.01 days 27.38 days In general, firma prefer a ccc. The management at Red Hamster Manufacturing wants to continue its internal discussions regarding its cash management. One of the finance ctam members presents the following case to her cohorts: Case in Discussion Lost Pigeon Aviation's management plans to finance is operations with bank loans that will be repoid as soon as cash is avalable. The company's management expects that it will take 40 days to manufacture and selil its products and 35 days to receive payment from its customers. Lost Plgeon Aviation's CFO has told the rest of the management team that they should expect the iength of the bank loans to be approximately 75 days. The management at Red Hamster Manufacturing wants to continue its internal discussions regarding Its cash monagement, One of the finance team nembers presents the following case to her cahorts: Case in Discussion Lost Pigeon Aviation's management plans to finance its operations with bank loans that will be repoid as soon as cash is available. The company's management expects that it will take 40 days to manufacture and sell its products and 35 days to receive poyment from its customers. Lost Pigeon Aviation's CFO has told the rest of the management team that they should expect the length of the bank loans to be approximately 75 days. Which of the following responses to the CFO's statement is most accurate? The CFO's approximation of the length of the bank loans should be accurate, because it will take 75 days for the company to manufacture, sell, and collect cash for its goods. All these things must cocur for the company to be able to repay its laans from the bank. The CFO is not taking into account the amount of time the company has to poy its suppliers. Generally, there is a certain length of time between the purchase of materials and labor and the payment of cash for them. The CFO can reduce the estimated length of the bank ioan by this amount of time. is it possible for a firm to have a negative CCC
