Questions: Compute the Cash Conversion Cycle (CCC) for UPS in each of the years
ID: 2710396 • Letter: Q
Question
Questions: Compute the Cash Conversion Cycle (CCC) for UPS in each of the years 2011-2013. How has this cycle changed over the period and why? Compute the changes in asset, liability and owners' equity accounts for 2013 (compared to 2012) using the UPS balance sheets. What was the firm's largest single source of funds for 2013? What was the firm's largest single use of funds for 2013? (Note: there is an Excel template you can use for your work). Compute UPS' internal rate of growth for 2013. Now compute the firm's sustainable rate of growth for 2013. Why are these two rates so different? The income statement and balance sheet data needed to evaluate the Cash Conversion Cycle (CCC) for Microsoft Corporation (MSFT) is found in the Excel file. Use this data to compute the CCC for 2008-2013. Describe the time series results and explain what has happened at Microsoft over this time period? Financial forecasting (Note: the financial statements and a forecast model are provided in the Excel file and found below): 1. 2. 3. 4. 5. Look at the balance sheet and income statement for UPS in 2013 and identify which entries you think will vary with sales and which will not. Compare each of your choices to the forecast model in the Excel file Are there elements of the following pro forma forecast for 2014 that you would change? How is the Common Equity balance for 2014 computed? Using the financial forecast provided in the Excel file, what are the external financing needs of UPS for 2014 where reve nues are expected to grow by 2% in 2014? Re-evaluate UPS' financing requirements where sales increase by 10%. to the "plug" figure which captures the effects of additional financing needed? Explain what happened and why. Use the "Goal Seek" function in Excel to calculate the rate of growth in UPS revenues for 2014 that requires zero new external financing. a. b. c. d. e. what happens f.Explanation / Answer
1)
Cash conversion cycle is a metric that expresses the length of time for the company to convert resource inputs into cash flows.
It is also referred as “cash cycle”.
Cash conversion cycle = DIO + DSO – DPO
Where,
DIO = Day’s inventory outstanding
DSO = Day’s sales outstanding
DPO = Day’s payable outstanding
Note:
The information for the problem is not provided; hence, use the above formulae to compute CCC.
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