Cash management is a really vital feature of supervisors. Companies should regulate their operations in a method that they can sustain growth and yet not run out of cash. Consider the case of Hungry Whale Electronics Company: Hungry Whale Electronics Company kind of is a mature firm that has a secure circulation of service. The adhering to information was taken from its financial statements last year $9,700,000 Annual sales $6,305,000 Cost of products offered $3,100,000 Inventory Accounts receivable $2,200,000 $2,700,000 Accounts payable Hungry Whale's CFO is interested in determining the length of time funds are tied up in functioning capital. Use the information in the preceding table to complete the following table. (Note: Use 365 days as the length of a year in all calculations, and also round all worths to 2 decimal areas.) Value Inventory Convariation Period Mean repertoire duration Payables Deferral Period Cash convariation cycle Both the inventory conversion period and also payables deferral perlod usage the average day-to-day COGS in their denominators whereas the average collection duration supplies average everyday sales in its denominator. Why perform these procedures usage various inputs? O Current assets need to be split by sales, yet existing liabilities need to be separated by the COGS. O Inventory and accounts payable are lugged at expense on the balance sheet, whereas accounts receivable are videotaped at the price at which items are offered. The administration at Hungry Whale Electronics Company kind of desires to management. One of the finance team members presents the adhering to instance to his cohorts: interior discCussions regarded its cash Which of the adhering to responses to the CFO's Case in Discussion statement is most accurate? O The CFO's approximation of the length of the financial institution loans must be accurate, Extensive Enterprise's administration plans to finance its operations via financial institution loans that will be repassist as quickly as cash is accessible. because it will certainly take 75 days for the agency to manufacture, market, and also collect cash for its products. All these points have to happen for the agency to be able to repay its loans from the bank. The company's management expects that it will take 40 days to manufacture and also offer its products and also 35 days to obtain payment O The CFO is not taking right into account the from its customers. Extensive's CFO has told the remainder of the management team that they need to mean the size of the bank loans to be roughly 75 days. amount of time the firm has to pay its companies. Typically, there is a particular size of time between the purchase of materials and also labor and also the payment of cash for them.
You are watching: Cash management is a very important function of managers
See more: What Does Nth Stand For In Texting ? What Does Nth Stand For In Texting
The CFO can minimize the approximated length of the bank loan by this amount of time.