Boise State University Operations And Supply Chain Management Assignment Help - Financial Management

Question - Capers, Inc. has just promoted you to Chief financial officer. Since this is a new office in the
company, you are understaffed and many of the responsibilities have been assigned to you.
The first task you have been assigned concerns the cash conversion cycle. Your boss has asked that
you examine the following data:
1. Inventory conversion period is 60 Days
2. Payables deferral period is 30 days
3. Receivables collection period of 40 days
The second task concerns the cost of bank loans under differing conditions. Specifically:
1. The company needs $1,500,000 for a new project.
2. The loan will cost 10% simple interest, for 4 months, with a 20% compensating balance.
Required:
1. What is the firm%u2019s cash conversion cycle?
1. H ...Read More ow many times per year is the firm%u2019s inventory turnover, if sales are $4,000,000 per
year?
1. If sales are all credit sales and amount to $4,000,000 per year, what is the firm%u2019s average
investment in receivables?
1. What is the nominal interest rate on the loan?
Part Two: Cash Budget
Capers, Inc. is developing its cash budget for the next year. Of Capers%u2019 sales, 20% is for cash,
another 60% is collected in the month following sale, and 20% is collected in the second month
following sale. November and December sales for 2010 were $229000 and $250,000, respectively.
Capers%u2019 purchases its raw materials two months in advance of its sales equal to 70% of its
final sales price. The supplier is paid one month after it makes delivery. For example, purchases for
April sales are made in February, and payment is made in March.
In addition, Capers pays $10,000 per month for rent and $20,000 each month for other expenditures.
Tax prepayments for $32,000 are made each quarter beginning in March.
The company%u2019s cash balance at December 31, 2010, was $26,000 and minimum balance of
$25,000 must be maintained at all times. Assume that any short-term financing needed to maintain
cash balance would be paid off in the month following the month of financing if sufficient funds are
available.
Interest on short-term loans (12%) is paid monthly. Borrowing to meet estimated monthly cash needs
takes place at the beginning of the month. For example, if in the month of April the firm expects to
have a need for an additional $60,500, these funds would be borrowed at the beginning of April with
interest of $605 (.12 x 1/12 x $60,500) owed for April and paid at the beginning of May.
Sales for Capers Inc.:
January $229,000
February $250,000
March $270,000
April $275,000
May $280,000
June $290,000
July $280,000

August $260,000
Required:
ï‚· Prepare a monthly cash budget for Capers Inc. covering the first 7 months of 2010.
Part Three: EOQ
Capers Inc. is also initiating an inventory management program using EOQ. Capers needs fastener
supplies to manufacture its products. The CFO estimates that the company will need about 250,000
cases next year. The cost of storing cases is about $1.10 each. The ordering cost is $400 for a
shipment.
Required:
1. What is the EOQ?
2. How many times will you order?
3. What are the shortcomings of the EOQ? What is your rationale?
Deliverables:
ï‚· By Tuesday, July 23, 2013, complete the requirements for Parts One, Two, and Three above.
Submit your results in a Microsoft Excel document showing all calculations, and in good form. ...Read Less

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