Working Capital Management LNI
REVIEW OF PARTIAL EXAMS
I. THEORETICAL
A. Introduction to finance
i. Finance
ii. Public Finance
iii. Personal Finance
iv. Business Finance
a. Branches with which it is related
b. Real Assets
c. Financial Assets
d. Financial Manager
e. Financial Manager's Decisions
B. Financial statement
b. Balance Sheet
i. Assets
ii. Liabilities
iii. Equity
c. Income Statement
i. Income
ii. Expenses
d. Owner’s Equity
e. Cash Flow
i. Operating activities
ii. Investing activities
iii. Financing activities
C. FINANCIAL ANALYSIS
a. Horizontal Financial Analysis
b. Vertical Financial Analysis
c. Liquidity
d. Efficiency
e. Leverage / Debt
f. Profitability
g. Market valuation / Growth
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Working Capital Management LNI
D. WORKING CAPITAL
a. Working capital
b. Components
c. Formula
d. Importance
E. CASH CONVERSION CYCLE
a. Cash
b. Cash equivalents
c. Operating Cycle
d. Cash Cycle
e. Cash Conversion Cycle
f. Days Inventory Outstanding (DIO)
g. Operating cycle
h. Days Sales Outstanding (DSO)
i. Days Payable Outstanding (DPO)
j. Cash conversion cycle timeline
II. CASE STUDIES
a. Net Working Capital
b. Current Ratio
c. Quick Ratio
d. Cash Ratio
FACULTAD DE CONTADURIA PUBLICA Y ADMINISTRACION UANL
Working Capital Management LNI
e. Net Working Capital
f. Current Ratio
g. Quick Ratio
h. Cash Ratio
FACULTAD DE CONTADURIA PUBLICA Y ADMINISTRACION UANL
Working Capital Management LNI
1. How long is the cash conversion cycle if DIO is 100 days, DSO is 24
days and DPO is 32 days?
2. How long is DIO, if Inventory turnover is 12 ?
3. How long is the cash conversion cycle if Inventory turnover is 12,
DSO is 25 days and DPO is 40 days?
4. How long is the operating cycle if DIO is 40 days, DSO is 25 days
and DPO is 37 days?
5. How long is DSO if Accounts Receivable turnover is 8 ?
6. How long is the operating cycle if Inventory turnover is 6, Accounts
Receivable turnover is 8 and DPO is 37 days?
7. How long is DPO if Accounts Payable turnover is 15
8. Machinary Inc On average, its inventories turnover is 9 and its
accounts receivable are collected in 50 days. Accounts payable are
paid approximately 40 days after they are originated. The company
has annual sales of approximately $10 million. Assume that there is
no difference in the investment per dollar of sales in inventory,
accounts payable, and accounts receivable. inventory, accounts
payable, and accounts receivable, and that the year has 360 days.
a) Calculate the operating cycle of the company.
b) Determine the cash conversion cycle of the company.
c) Calculate the amount of resources necessary to sustain the company's
cash conversion cycle.
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Working Capital Management LNI
9. Dasha company completes its inventory turnover 10 times a year,
has an average payment period of 45 days and an average
collection period of 40 days. The company's annual sales are $5.5
million. Assume that there is no difference in the investment per
dollar of sales in inventory, accounts receivable, and accounts
receivable. inventory, accounts receivable, and accounts payable,
and that the year has 360 days.
a) Calculate the company's operating cycle and cash conversion cycle.
b) How much must the company invest in resources to sustain its operating
cycle?
c) If the company pays 14% for these resources, how much would its annual
profits increase as its cash conversion cycle changes favorably?
d) increase by favorably changing its current cash conversion cycle by 10 days?
10. Nitratis Inc in the cash conversion cycle Garrett Industries
completes its inventory turnover 5 times a year, has an average
collection period of 45 days and an average payment period of 40
days. The company's annual sales are $1 million. Assume that there
is no difference in the investment per dollar of inventory sales,
accounts receivable, and accounts payable, and that the year has
360 days.
a) Calculate the operating cycle of the company.
b) Determine the cash conversion cycle of the company.
c) Calculate the amount of resources necessary to sustain the company's
cash conversion cycle.
11. Banana Republic has an operating cycle of 120 days.
a) If its average inventory age is 50 days, how long is its average
collection period?
b) If its average payout period is 30 days, how long is its cash conversion
cycle?
c) Place all of this information on a information on a timeline
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