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Economics
Aztec Products wishes to evaluate its cash conversion cycle (CCC). Research by one of the
firm’s financial analysts indicates that on average the firm holds items in inventory for 65
days, pays its suppliers 35 days after purchase, and collects its receivables after 55 days.
The firm’s annual sales (all on credit) are about R2.1 billion, its cost of goods sold represent
about 67 percent of sales, and purchases represent about 40 percent of cost of goods sold.
Assume a 365-day year.
3.1 (7 points) What is Aztec Products’ cash conversion (CCC)?
3.2 (3 points) If Aztec could shorten its CCC by 5 days, would it be best to reduce the
inventory holding period, reduce the receivable collection period, or extend the
accounts payable period? Why?
3.3 (3 points) How should the firm manage its inventory, accounts receivable, and
accounts payable in order to reduce the length of its cash conversion cycle?
firm’s financial analysts indicates that on average the firm holds items in inventory for 65
days, pays its suppliers 35 days after purchase, and collects its receivables after 55 days.
The firm’s annual sales (all on credit) are about R2.1 billion, its cost of goods sold represent
about 67 percent of sales, and purchases represent about 40 percent of cost of goods sold.
Assume a 365-day year.
3.1 (7 points) What is Aztec Products’ cash conversion (CCC)?
3.2 (3 points) If Aztec could shorten its CCC by 5 days, would it be best to reduce the
inventory holding period, reduce the receivable collection period, or extend the
accounts payable period? Why?
3.3 (3 points) How should the firm manage its inventory, accounts receivable, and
accounts payable in order to reduce the length of its cash conversion cycle?
16. In the short run money is neutral and in the long run money is not neutral (a) True (b) False
17. A currency is said to Depreciate if there is a fall in its market price due to market forces. As a result, the currency will buy less, foreign exchange in the foreign exchange market. (a) True (b) False
18. ……. expectation assumes that people form their expectations of inflation based on the inflation they have recently observed (a) Adaptive (b) Observed (c) Rational (d) Projected
19. The Balance of payments of a country is constructed on the principle of …. (a) Public sector accounting (b) Single-entry book-keeping (c) Reconciliation (d) Double-entry book-keeping
20. The main instruments of fiscal policy are: (a) CBN tools and Government project (b) Government expenditure and Tax rate (c) Government Budgets and Revenue (d) Interest rate and Bank rate
17. A currency is said to Depreciate if there is a fall in its market price due to market forces. As a result, the currency will buy less, foreign exchange in the foreign exchange market. (a) True (b) False
18. ……. expectation assumes that people form their expectations of inflation based on the inflation they have recently observed (a) Adaptive (b) Observed (c) Rational (d) Projected
19. The Balance of payments of a country is constructed on the principle of …. (a) Public sector accounting (b) Single-entry book-keeping (c) Reconciliation (d) Double-entry book-keeping
20. The main instruments of fiscal policy are: (a) CBN tools and Government project (b) Government expenditure and Tax rate (c) Government Budgets and Revenue (d) Interest rate and Bank rate
11. Unsustained…… occurs when prices in the goods and services market are high relative to resource prices and other costs (a) economic recession (b) economic boom (c) inflation (d) deflation
12. Why do people hold M1? (a) To earn interest on their money (b) To carryout transactions (c) As a hedge against inflation (d) As a means to have enough liquid assets to buy bonds and other securities
13. Decreases in Aggregate Demand lead to …… and …. (a) boom, full employment (b) recession, cyclical unemployment (c) boom, cyclical unemployment (d) recession, full employment
14. The type of expectation that asserts that individuals make use of both present and past information to make future predictions is ……… expectation (a) rational (b) future (c) speculative (d) anticipated
15. …. in the exchange rate value of the nation’s currency will shift the Aggregate Demand curve inward. (a) Reduction (b) Shock (c) Increase (d) Boom
12. Why do people hold M1? (a) To earn interest on their money (b) To carryout transactions (c) As a hedge against inflation (d) As a means to have enough liquid assets to buy bonds and other securities
13. Decreases in Aggregate Demand lead to …… and …. (a) boom, full employment (b) recession, cyclical unemployment (c) boom, cyclical unemployment (d) recession, full employment
14. The type of expectation that asserts that individuals make use of both present and past information to make future predictions is ……… expectation (a) rational (b) future (c) speculative (d) anticipated
15. …. in the exchange rate value of the nation’s currency will shift the Aggregate Demand curve inward. (a) Reduction (b) Shock (c) Increase (d) Boom
Economics
If Aztec could shorten its CCC by 5 days, would it be best to reduce the inventory holding period, reduce the receivable collection period, or extend the accounts payable period? Explain why.
5) Your firm is one of the largest bakery’s in the area. As part of your risk management process, you are considering using options to hedge the price risk on your biggest input – wheat. You have determined that a price of R52/per ton would allow for you to keep the same profit margin as last year. The following wheat options offer a strike price of R50/per ton expiring in 1 month:
▪ Call options on wheat are selling at a premium of R0.87 per ton.
▪ Put options on wheat are selling for R0.72 per ton.
(a) Given the information above, will you need need a call or a put option? [1 mark]
(b) If each option is for 100 tons, and you require 1000 tons of wheat, demonstrate the outcome if, at expiry, the spot price of wheat is (i) R40 per ton and (ii) R60 per ton.
▪ Call options on wheat are selling at a premium of R0.87 per ton.
▪ Put options on wheat are selling for R0.72 per ton.
(a) Given the information above, will you need need a call or a put option? [1 mark]
(b) If each option is for 100 tons, and you require 1000 tons of wheat, demonstrate the outcome if, at expiry, the spot price of wheat is (i) R40 per ton and (ii) R60 per ton.
Economics
1. Total Quality Management (TQM) is an enhancement to the traditional way of doing business. It is defined both a philosophy and a set of guiding principles that represent the foundation of a continuously improving organization. Referring to the statement, discuss why TQM may be difficult to achieve in a short period of time for a company that has placed a low priority on the quality initiatives over the years.
(10 Marks)
What is his marginal rate of substitution between X =3 and Y=4? If A=1, a = 0.4 and b =
0.5.
0.5.
Question # 02
A university is deciding between two meal plans. One plan charges a fixed fee of $600 per semester and allows students to eat as much as they want. The other plan charges a fee based on the quantity of food consumed. Under which plan will students eat the most? Explain through economic theory.
A university is deciding between two meal plans. One plan charges a fixed fee of $600 per semester and allows students to eat as much as they want. The other plan charges a fee based on the quantity of food consumed. Under which plan will students eat the most? Explain through economic theory.
- Under what conditions will monopolies and perfectly competitive firms make losses, even when they are producing the profit-maximizing output? Under what conditions will they both stay in business and continue to produce in the short run, even with making losses?
Explain the classical quantity theory of money
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#339914 on Dec 2023
#339914 on Dec 2023