Info
Warning
Danger
/ Homework Answers / Accounting / The management at Loud Noise Recordings wants to continue its

Question

The management at Loud Noise Recordings wants to continue its internal discussions regarding its cash management. One of the finance team members presents the following case to her cohorts: The CFO's approximation of the length of the bank loans should be accurate, because it will take 75 days for the company to manufacture, sell, and collect cash for its goods. All these things must occur for the company to be able to repay its loans from the bank. The CFO is not taking into account the amount of time the company has to pay its suppliers. Generally, there is a certain length of time between the purchase of materials and labor and the payment of cash for them. The CFO can reduce the estimated length of the bank loan by this amount of time. Red Pencil Office Supplies's management plans to finance its operations with bank loans that will be repaid as soon as cash is available. The company's management expects that it will take 40 days to manufacture and sell its products and 35 days to receive payment from its customers. Red Pencil Office Supplies's CFO has told the rest of the management team that they should expect the length of the bank loans to be approximately 75 days. Is it possible for a firm to have a negative CCC? No Yes

 

Solution
5 (1 Ratings )

Solved
Accounting 1 Month Ago 73 Views
This Question has Been Answered!
Premium Content -