in January 2015, Ther was named treasurer of Waher 5peed-0. He decided that he could best orient himself by systematically empmining each area of the company's financial operations. He began by studying the firm's short-term linandal actwities. Walker Specd-0, located in-senthern Callfornia, shedatiues in a furniture line calted "splash:, of high quality and contemporary design, the fumiture appeais to the customer who wants something unique tor his or her home or apartment. Most Walker Speed-o furniture as buit by speciat order because a wide viriety of uphobtery, accent trimming and colors is available. The product line is dhtribeted through erclualive dealenhip arrangements with wel-established retail stores. Walker 5 peed-os manulacturing process virtually eliminates the use of wood. Plastic and metal provide the bask framewark, and wood is used only for detorative purposes. Walker Speed 0 entared the plasticfumiture market in lake 2007. The compamy markets iti plastichurniture products as indoor-outdoor items under the brand hame "Future". ruture plastic furniture emphasires copifort, dupability, and practicality and is dintibuled through wholesalen. Then Future line has been very wiccesifut, sccounting for nearty 40 perent of the firms's sales and prafita in 7014. Wiker Speed-o anticipstes some add tians to the future line and alyo some limited chanct of diection in as promotion in an effort to expand the applicavions af the platic fumiture Iyter has decided to stiydy the fimis caif management gractice. To determine the effects of these practices, he must first determine the current aperating and cash converson cycles. In his inwestigations lie found that Walier speed: o purchases alf iti inw mateiais and production sugpies on oper accoun. The campaisis eperatiry at production ienels that preciude volume discouns. Most sigplien do not offer cosh diecourts, and Wraleer Speed O vsually recehes credit lemb of aet 30 . Aa analyeis of Walle1 Speed-0's acounts plrable shawed that its everage payment perod is 30 days. Ther consulted industry dota and found that the industry averesh peyment period wav is thays inverigation of sux Catiomia fumiture manutacturers reveated that their dverabe payment pericd was abo 39 das. Nest. Nier atudied the praduction cycie and inventary policies Wstier Soeed o bies not to hald ant 110 dayz. Fyler dutermined that the inducteysuandard, as reportedin a survey oone by Furniture Age, the trede asociation journat, was s3 day. Walker Speed- 0 sells to all its customers on a net-60 basis, in line with the industry trend to grant such credit terms on specialty furniture. Tyler discovered, by aging the accounts receivable, that the average collection period for the firm was 75 daysi Investigation of the trade association's and California manufacturers' averages showed that the same collection period existed where net.60 credit terms were given. Where cash discounts were offered, the collection period was significantly shortened. Tyler belleved that if Walker Speed- 0 were to offer credit terms of 3/10 net 60 , the average collection period could be reduced by 40 percent Walker Speed-O was spending an estimated $26,500,000 per vear on operating-cycle investments. TVler considered this expenditure level to be the minimum he could expect the firm to diburse during 2015 . Hes concem was whether the firmis cash management was as etricient as it couid be. He knew that the company paid 15 percent annual interedt for its resource invertment. For this reason, he was concirned about the financing cost resulting from any inefficiencies in the management of walker speed-oscash conversion cycle (Note Assumer a 365 day year and assume that the operiting bycle inwestment per dollar of payabies, inventory. and roceivables is the same.) 1. Assuming a cocistant rate for purchases, production, and soles throughout the year, what are Watuer Speed-ors eosting operating oyde (OC), cosh conversion cycle (CCC), and resource investment need? 2. If Tyer can optimine Walker Speed-o's operations according to industry standardw, what will Wallur speed-o's openting cycle (oC), cash conversion cycle (CCC), and resource investment need to be under these more efficient conditions? 3. In ferms of resource imestrseat requirenents, what is the cost of Walker Speed-os operistional inelficiency? 4. If in addition to achievine industry standarts for gapbles and inventery the firm canreduce the average collection period by offeeing credit terms of 3/10 net 60 , what additional avings in Itesoiate investasent costs will fesult froes the shortened cash consersiot cycle, assurning that the level of sates remains constant? 5. If the firmis sales (all on credit) are $40,000,000 and 451 of the customets are eroected to take the cash diskount, by how much wul the firms annual ceverues be-redieed as a result of the discourt? 6. If the firmis wariable cost of the $40,000,000 in sales is 300 , determ nethereduction in the average impestment in accounts recelvable and ther annoal savings that will ceicit from this reduced investment, assuming thot sales restain constant. 7. If the lirmis bad-debts expenses decline from 2.5 to 1.5% of sales, what annual savings wil resuit, assuming that sales remain constant? 8. Use your findin is in parts (5) tureagh (7) to aswess whether offering the cast ditcount can be jutified financialiy. Eeptain why or why not. 9. On the basis of vour anabysis in parts 1 thiough 8 , what reconmendations would wou offer Tyler? 10. Review for Tyler the koy sources of short-term financing, other than accounts payable, that he may consider for financing Watker Ijpeed 's resource imvestosent beed calculated in part 2. Bel sure to mention both unsecured and secured source. in January 2015, Ther was named treasurer of Waher 5peed-0. He decided that he could best orient himself by systematically empmining each area of the company's financial operations. He began by studying the firm's short-term linandal actwities. Walker Specd-0, located in-senthern Callfornia, shedatiues in a furniture line calted "splash:, of high quality and contemporary design, the fumiture appeais to the customer who wants something unique tor his or her home or apartment. Most Walker Speed-o furniture as buit by speciat order because a wide viriety of uphobtery, accent trimming and colors is available. The product line is dhtribeted through erclualive dealenhip arrangements with wel-established retail stores. Walker 5 peed-os manulacturing process virtually eliminates the use of wood. Plastic and metal provide the bask framewark, and wood is used only for detorative purposes. Walker Speed 0 entared the plasticfumiture market in lake 2007. The compamy markets iti plastichurniture products as indoor-outdoor items under the brand hame "Future". ruture plastic furniture emphasires copifort, dupability, and practicality and is dintibuled through wholesalen. Then Future line has been very wiccesifut, sccounting for nearty 40 perent of the firms's sales and prafita in 7014. Wiker Speed-o anticipstes some add tians to the future line and alyo some limited chanct of diection in as promotion in an effort to expand the applicavions af the platic fumiture Iyter has decided to stiydy the fimis caif management gractice. To determine the effects of these practices, he must first determine the current aperating and cash converson cycles. In his inwestigations lie found that Walier speed: o purchases alf iti inw mateiais and production sugpies on oper accoun. The campaisis eperatiry at production ienels that preciude volume discouns. Most sigplien do not offer cosh diecourts, and Wraleer Speed O vsually recehes credit lemb of aet 30 . Aa analyeis of Walle1 Speed-0's acounts plrable shawed that its everage payment perod is 30 days. Ther consulted industry dota and found that the industry averesh peyment period wav is thays inverigation of sux Catiomia fumiture manutacturers reveated that their dverabe payment pericd was abo 39 das. Nest. Nier atudied the praduction cycie and inventary policies Wstier Soeed o bies not to hald ant 110 dayz. Fyler dutermined that the inducteysuandard, as reportedin a survey oone by Furniture Age, the trede asociation journat, was s3 day. Walker Speed- 0 sells to all its customers on a net-60 basis, in line with the industry trend to grant such credit terms on specialty furniture. Tyler discovered, by aging the accounts receivable, that the average collection period for the firm was 75 daysi Investigation of the trade association's and California manufacturers' averages showed that the same collection period existed where net.60 credit terms were given. Where cash discounts were offered, the collection period was significantly shortened. Tyler belleved that if Walker Speed- 0 were to offer credit terms of 3/10 net 60 , the average collection period could be reduced by 40 percent Walker Speed-O was spending an estimated $26,500,000 per vear on operating-cycle investments. TVler considered this expenditure level to be the minimum he could expect the firm to diburse during 2015 . Hes concem was whether the firmis cash management was as etricient as it couid be. He knew that the company paid 15 percent annual interedt for its resource invertment. For this reason, he was concirned about the financing cost resulting from any inefficiencies in the management of walker speed-oscash conversion cycle (Note Assumer a 365 day year and assume that the operiting bycle inwestment per dollar of payabies, inventory. and roceivables is the same.) 1. Assuming a cocistant rate for purchases, production, and soles throughout the year, what are Watuer Speed-ors eosting operating oyde (OC), cosh conversion cycle (CCC), and resource investment need? 2. If Tyer can optimine Walker Speed-o's operations according to industry standardw, what will Wallur speed-o's openting cycle (oC), cash conversion cycle (CCC), and resource investment need to be under these more efficient conditions? 3. In ferms of resource imestrseat requirenents, what is the cost of Walker Speed-os operistional inelficiency? 4. If in addition to achievine industry standarts for gapbles and inventery the firm canreduce the average collection period by offeeing credit terms of 3/10 net 60 , what additional avings in Itesoiate investasent costs will fesult froes the shortened cash consersiot cycle, assurning that the level of sates remains constant? 5. If the firmis sales (all on credit) are $40,000,000 and 451 of the customets are eroected to take the cash diskount, by how much wul the firms annual ceverues be-redieed as a result of the discourt? 6. If the firmis wariable cost of the $40,000,000 in sales is 300 , determ nethereduction in the average impestment in accounts recelvable and ther annoal savings that will ceicit from this reduced investment, assuming thot sales restain constant. 7. If the lirmis bad-debts expenses decline from 2.5 to 1.5% of sales, what annual savings wil resuit, assuming that sales remain constant? 8. Use your findin is in parts (5) tureagh (7) to aswess whether offering the cast ditcount can be jutified financialiy. Eeptain why or why not. 9. On the basis of vour anabysis in parts 1 thiough 8 , what reconmendations would wou offer Tyler? 10. Review for Tyler the koy sources of short-term financing, other than accounts payable, that he may consider for financing Watker Ijpeed 's resource imvestosent beed calculated in part 2. Bel sure to mention both unsecured and secured source