incremental cash flow

Six Twelve, Inc., is considering opening up a new convenience store in downtown New York City. The expected annual revenue at the new store is $700,000. To estimate the increase in working capital, analysts estimate the ratio of cash and cash-equivalents to revenue to be 0.03 and the ratios of receivables, inventories, and payables to revenue to be 0.05, 0.10, and 0.04, respectively, in the same industry. What is the incremental cash flow related to working capital when the store is opened?  (Enter negative amount using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)

Incremental cash flow

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Problem 14.1

Wolfgang’s Masonry management estimates that it takes the company 31 days on average to pay off its suppliers. It also knows that the company has days’ sales in inventory of 55 days and days’ sales outstanding of 45 days. How does Wolfgang’s cash conversion cycle compare with the industry average of 77 days?

Wolfgang’s cash conversion cycle is  days.

Wolfgang’s cash conversion cycle is  the industry average. The firm is than other firms in the industry in managing its working capital.

Problem 14.2

Northern Manufacturing Company found that during the last year, it took an average of 41 days to pay its suppliers, while it took 55 days to collect its receivables. The company’s days’ sales in inventory was 56 days. What was Northern’s cash conversion cycle?

Northern’s cash conversion cycle is  days.

Problem 14.4

Lilly Bakery distributes its products to more than 75 restaurants and delis. The company’s average collection period is 17 days, and it keeps its inventory for an average of 3 days. What is Lilly’s operating cycle?

Lilly’s operating cycle is  days.

Problem 14.10

Pacific Traders has annual sales of $1,819,223. The firm’s financial manager has determined that using a lockbox will reduce collection time by 1.1 days. If the firm’s opportunity cost on savings is 5.2 percent, what are the savings from using the lockbox?  (Round intermediate calculations and final answer to 2 decimal places, e.g. 12.25.)

The savings from using the lockbox are $ per year.