FI516 Homework help

1. 2. 3. 4. 5. 6. 7. 8. FIN 515 Week 7 Individual Homework Georgia's Best had an inventory turnover of 3.2 in 2011, and sales of $1,344 M. If the sales in 2012 are as forecasted, $1,427 and the inventory turnover is improved to 3.6, what was the change in inventory? (Drop of $23.6M) Tony's Laundry Equipment has a cash conversion cycle of 112 days, an average collection period of 42 days and an inventory conversion period of 122 days. What is the Payable deferral period? (52 days) Diamond Chefs work on a 365 financial calendar. Their accounts receivables were $3.7M at the end of 2011, on credit sales of $57M. What was their DSO, or average collection period? (24 days) Diamond Chefs total sales in 2011 was $65.5M and their average inventory was $24.3M. What was their Inventory Turnover Ratio? (2.7 turns) Diamond Chefs is forecasting their sales of $65.5M in 2011 to increase by 5.5% in 2012, but they are going to keep the inventory, which was $24.3M in 2011, to an increase of 3.2% in 2012. What is the expected 2012 Inventory Turnover Ratio? (2.8 turns) The CEO at Diamond Chefs has decided that they should not take the cash discount on their payments to Big Kitchen Warehouse, Inc., who sells them their ovens and ranges. Big Kitchen Warehouse's payments terms are 3/10, net 35. Cash is getting tight for Diamond, and they want to hold onto the cash. What will be the nominal cost of Diamond not taking the cash discount? (45.2%) (Using problem #6 information) The CFO does not think that the nominal cost of the discount shows the compounding of not making payments in time for the cash discount, over the period of the year. What would be the effective cost of Diamond not taking the cash discount? (56.2%) The CFO at Diamond Chefs provides his numbers for the effective and nominal costs of not taking the cash discount to the CEO, which you provided (thank you.) The CEO realizes that this would be pretty expensive to go this route, and suggested that, if it would not hurt the vendor relations too badly, what if they actually paid the vendor, who has terms of 3/10, net 35 in 55 days? Figure out for him what the effective rate would be now. (28.1%)