Sukick: Financial Management Exercise 1: Working Capital Management Sabrina Sda Bhd has an annual cash outlay RM800,000. The company's average collection period is 60 days while it pay its creditors within 45 days. The company has an average age of inventories of 90 days. Using a 360 days cycles, calculate the firm's: 1. Cash cycle II. Cash turnover III. Minimum operating cash balance Exercise 2: Cash Conversion Cycle Given the following information from Elite PC's 2013 income statement and balance sheet (numbers are in S millions), calculate the company's cash conversion cycle (CCC) and use it to evaluate the company's efficiency: Cost of Goods Sold Accounts Receivable Inventory Accounts payable 66,467 54.226 5160 643 10,234 Exercise 3: Trade Credit Your corporation, Vitamin Soda, purchases goods $200 from a supplier at 2/10 net 40. If your business requires the entire 40 days to pay back your supplier, would it be better to take a loan from the bank after the discount or just pay the EAR given by the trade credit? Exercise 4: Receivable management Your company currently sells its product with a 2% discount to customers who pay cash immediately. Otherwise the full price is due within 30 days. Sixty percent of your customers take advantage of the discount. You are considering dropping the discount so that your new terms would just be net 30. If you do that, you expect to lose some customers who were only willing to pay the discounted price, but the rest will simply switch to taking the full 30 days to pay. Altogether, you estimate that you will sell 20 fewer units per month (compared to 1,000 units currently). Your variable cost per unit is $90 and your price per unit is $150. If your required return is 0.5% per month, should you switch your policy