Why Choose Us?
0% AI Guarantee
Human-written only.
24/7 Support
Anytime, anywhere.
Plagiarism Free
100% Original.
Expert Tutors
Masters & PhDs.
100% Confidential
Your privacy matters.
On-Time Delivery
Never miss a deadline.
Pretty Lady Cosmetic Products has an average production process time of 40 days
Pretty Lady Cosmetic Products has an average production process time of 40 days. Finished goods are kept on hand for an average of 15 days before they are sold. Accounts receivable are outstanding an average of 35 days, and the firm receives 40 days of credit on its purchases from suppliers.
Assume net sales of $1,200,000 and cost of goods sold of $900,000. Determine the average investment in accounts receivable, inventories, and accounts payable. What would be the net financing need considering only these three accounts?
*Note: To solve this problem, you will need to first find the Inventory Period, the Receivables Period, and the Payment Period.
$153,054.79
$154,054.79
$152,054.79
$152,154.80
Expert Solution
| Computation of Net Financing Need: | ||
| Sales | 12,00,000 | |
| Cost of goods sold | 9,00,000 | |
| Days for inventory conversion | 55 | |
| Inventory turnover ratio | 6.64 | [365/ Days for Inventory] |
| Investment in inventory | 135616.44 | [COGS/ Inventory turnover ratio] |
| Sales | 12,00,000 | |
| Days for accounts receivable | 35 | |
| Accounts receivable turnover ratio | 10.43 | [365/ Days for accounts receivable] |
| Cost of goods sold | 9,00,000 | |
| Days for accounts payable | 40 | |
| Accounts Payable turnover ratio | 9.125 | [365/ Days for accounts payable] |
| Investment in accounts payable | 98630.14 | [COGS/ Accounts payable turnover ratio] |
| Investment in inventory | 135616.44 | |
| Investment in accounts receivable | 115068.49 | |
| Investment in accounts payable | 98630.14 | |
| Net financing needed | 152054.79 | |
The correct option is 3rd "$152,054.79".
Archived Solution
You have full access to this solution. To save a copy with all formatting and attachments, use the button below.
For ready-to-submit work, please order a fresh solution below.
