Extensive Enterprise Inc. 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 $2, 700,000 in inventories, $1, 900,000 in accounts receivable, and $2, 400,000 in accounts payable. Approximately how long does it take Extensive Enterprise to convert its raw materials to its finished products and then to sell those goods? 38.23 days 42.48 days 40.36 days 36.11 days on average, it takes from the time a sale is made until the time cash is collected from customers. Extensive Enterprise 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. What is the length of Extensive Enterprise's cash conversion cycle (CCC)? 28.63 days 34.36 days 24.34 days 30.06 days the management at Extensive Enterprise wants to continue its internal discussions regarding its cash management. One of the finance team members presents the following case to her cohorts: Which of the following responses to the CFO's statement is most accurate? The CFO is not taking into account the amount of time the company has to pay 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 loan by this amount of time. 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 occur for the company to be able to repay its loans from the bank. Is it possible for a firm to have a negative CCC? No Yes Extensive Enterprise Inc. 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 $2, 700,000 in inventories, $1, 900,000 in accounts receivable, and $2, 400,000 in accounts payable. Approximately how long does it take Extensive Enterprise to convert its raw materials to its finished products and then to sell those goods? 38.23 days 42.48 days 40.36 days 36.11 days on average, it takes from the time a sale is made until the time cash is collected from customers. Extensive Enterprise 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. What is the length of Extensive Enterprise's cash conversion cycle (CCC)? 28.63 days 34.36 days 24.34 days 30.06 days the management at Extensive Enterprise wants to continue its internal discussions regarding its cash management. One of the finance team members presents the following case to her cohorts: Which of the following responses to the CFO's statement is most accurate? The CFO is not taking into account the amount of time the company has to pay 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 loan by this amount of time. 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 occur for the company to be able to repay its loans from the bank. Is it possible for a firm to have a negative CCC? No Yes
