the wintrope company is constructing a five year plan. the firms acp is currentl
ID: 2669158 • Letter: T
Question
the wintrope company is constructing a five year plan. the firms acp is currently 90 days ,while its inventory turnover ratio is 3x based on cogs. the cmpany has forcast aggresive revenue growth along with efficiency improvements in manufacturing and credit and collections as follows (year 0 is the current year).
year
------------------------------------------------------------------------------------------------
0 1 2 3 4 5
revenue (00000) 50.0 57.5 66.0 76.0 87.5 100.0
cost ratio 60% 59% 58% 57% 56% 55%
acp(days) 90 70 60 50 45 40
inventory turnover 3x 4x 5x 6x 6.5x 7x
for each planned year
a calcuate the cogs
b cacalute the a/r balance at the year end
c calcuate the inventory balance at year end
Explanation / Answer
Year
0
1 year
2 year
3 year
4year
5 year
Revenue
50
57.5
66
76
87.5
100
Cost ratio
60%
59%
58%
57%
56%
55%
COGS
30000
33925
38280
43320
49000
55000
b cacalute the a/r balance at the year end
ACP=( A/R) /SALES X 360 =
A/R= (ACP X SALES) /360
1year
11181
2year
11000
3year
10556
4year
10938
5year
11111
c calcuate the inventory balance at year end
INV.TURNOVER=cogs/inv
Inventory= cogs/ INV.TURNOVER
1year
8481
2year
7656
3year
7720
4year
7538
5year
7857
Year
0
1 year
2 year
3 year
4year
5 year
Revenue
50
57.5
66
76
87.5
100
Cost ratio
60%
59%
58%
57%
56%
55%
COGS
30000
33925
38280
43320
49000
55000
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