Chapter 15 Problem 1 1 Pretty Lady Cosmetic Products has an average production process time of 40 days Finished goods are kept on hand for an average of 15 days before they are sold Accounts receivable are outstanding an average of 35 days, and the firm receives 40 days of credit on its purchases from suppliers Estimate the average length of the firms short term operating cycle How often would the cycle tur over in a year Assume net sales of $1,200,000 and cost of goods sold of $900,000 Determine the average investment in accounts receivable, inventories, and accounts payable What would be the net financing need considering only these three accounts Chapter 16 Problem 1 1 A supplier is offering your firm a cash discount of 2 percent if purchases are paid for within ten days otherwise, the bill is due at the end of 60 days Would you recommend borrowing from a bank at an 18 percent annual interest rate to take advantage of the cash discount offer Explain your answer

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Chapter 15 Problem 1 1. Pretty Lady Cosmetic Products has an average production process time of 40 days. Finished goods are kept on hand for

Chapter 15 Problem 1

1. Pretty Lady Cosmetic Products has an average production process time of 40 days. Finished goods are kept on hand for an average of 15 days before they are sold. Accounts receivable are outstanding an average of 35 days, and the firm receives 40 days of credit on its purchases from suppliers.

Estimate the average length of the firms short-term operating cycle. How often would the cycle tur over in a year?
Assume net sales of $1,200,000 and cost of goods sold of $900,000. Determine the average investment in accounts receivable, inventories, and accounts payable. What would be the net financing need considering only these three accounts?

Chapter 16 Problem 1

1. A supplier is offering your firm a cash discount of 2 percent if purchases are paid for within ten days; otherwise, the bill is due at the end of 60 days. Would you recommend borrowing from a bank at an 18 percent annual interest rate to take advantage of the cash discount offer? Explain your answer.