Chapter 18 Questions 3–11 And Problems Section 3

Ch 18 Questions 3 11 Questions And Problems Section3 Changes

Identify the effects of specific changes on the operating cycle, including increases, decreases, or no change; calculate accounts receivable based on credit sales and days past due; analyze exchange rate data, including forward vs. spot rates and implications for currency appreciation or depreciation; determine the best investment location based on interest rates and forward rates across countries; and prepare a detailed final paper proposal on race discrimination in the workplace, including relevant references and resources.

Paper For Above instruction

The present discussion integrates multiple aspects of financial management and a comprehensive exploration of race discrimination in the workplace, demonstrating the multifaceted nature of contemporary business challenges. Initially, the focus lies on analyzing operational cycle dynamics and their sensitivity to various operational parameters. Subsequently, the investigation extends to foreign exchange rate evaluations, investment decision-making, and finally, a detailed outline for a research paper addressing racial discrimination, integrating scholarly resources and personal observations.

Analysis of Operating Cycle Changes

The operating cycle, a key performance indicator, measures the time span from acquiring inventory to collecting cash from sales. Variations in components such as receivables, payables, and inventory turnover significantly influence this cycle. When average receivables increase (a), the collection period lengthens, leading to an extended operating cycle (I). Conversely, enhanced credit repayment times for customers (b) also elongate the cycle, as cash inflows are delayed. An increase in inventory turnover from 3 to 6 times (c) shortens the cycle, as inventory is sold more rapidly (D). Similarly, an increase in payables turnover from 6 to 11 times (d) signifies faster payments to suppliers, potentially reducing the operating cycle duration (D). An elevation in receivables turnover from 7 to 9 times (e) shortens the collection period, thus decreasing the operating cycle (D). Accelerating payments to suppliers (f) shortens the total cycle by reducing the time accounts are outstanding.

Accounts Receivable Calculation

Arizona Bay Corporation, offering net 30 terms with an average accounts receivable overdue by four days, suggests a receivables turnover ratio based on daily sales. With annual credit sales of $9.75 million, and assuming a 365-day year, the average daily sales equate to approximately $26,712 ($9,750,000 / 365). Since receivables are four days past due, the average accounts receivable balance is calculated as:

Average Accounts Receivable = Daily Sales x Days Past Due = $26,712 x 4 ≈ $106,848

This balance indicates the company's receivable on the balance sheet, accounting for the typical delay in collections.

Foreign Exchange and Currency Valuation

The spot exchange rate for the Canadian dollar is Can$1.09, and the six-month forward rate is Can$1.11. To ascertain the relative value of the currencies, compare the rates: a higher forward rate indicates expectations of currency appreciation. If the forward rate exceeds the spot rate (Can$1.11 > Can$1.09), the Canadian dollar is expected to strengthen relative to the U.S. dollar.

Assuming absolute Purchasing Power Parity (PPP), the implied U.S. price of an Elkhead beer costing Can$2.50 can be estimated as:

Price in USD = Price in CAD / Exchange Rate = Can$2.50 / 1.09 ≈ $2.29

However, actual prices in the U.S. might differ due to factors such as transportation costs, taxes, and market demand, which distort the PPP assumption.

The Canadian dollar's forward rate being higher than the spot rate suggests it is trading at a premium, reflecting expectations of appreciation. The currency expected to appreciate (Canadian dollar) also indicates that investors might anticipate higher interest rates in Canada to compensate for the currency’s potential strengthening, aligning with uncovered interest rate parity principles.

Interest Rate Arbitrage and Investment Decisions

In assessing where to invest, the U.S. interest rate of 0.31% per month totals approximately 3.72% annually (considering simple interest), while the British interest rate of 0.34% per month accumulates to approximately 4.08% annually. The spot exchange rate (£.573) and forward rate (£.575) suggest a marginal premium for the British pound in the forward market.

Using interest rate parity, the expected return on investing in the U.S. versus the U.K. depends on the interest rates and forward rates. Since the U.K. interest rates are higher (approx. 4.08% vs. 3.72%), and the forward rate slightly exceeds the spot, an investor would prefer the U.K. investment, expecting higher returns adjusted for currency movements, assuming no transaction costs. This arbitrage indicates that U.S. investors might seek to capitalize on higher interest rates in the U.K., facilitated by the forward market, conforming with the principles of international financial arbitrage.

Research Proposal on Race Discrimination in the Workplace

The proposed research aims to explore race discrimination within organizational environments, emphasizing its impact and the role of management in fostering an inclusive culture. The focus on race discrimination is informed by personal observations and extensive literature advocating for equitable treatment. Key themes include the psychological effects on victims, organizational policies, and systemic barriers that perpetuate racial inequities.

Resource 1: Hasford (2016) investigates cultural narratives and racism in the Canadian context, highlighting resistance efforts and the societal impact of racial stereotyping in workplace settings. The study offers valuable insights into how racial biases are formed and resisted, contributing to understanding and addressing workplace discrimination.

Resource 2: Banks (2016) provides practical strategies for managers to promote healthy dialogues about race, emphasizing leadership's role in mitigating discrimination and fostering diversity. This resource offers actionable recommendations for creating an inclusive organizational climate.

Resource 3: Davis (2016) discusses broader societal issues regarding race, income disparities, and employment inequalities, offering a macro perspective that complements micro-level organizational strategies. The analysis underscores the importance of systemic change alongside organizational policies.

The draft outline of the research includes examining the prevalence of racial discrimination, its psychological and economic impacts, organizational policies, and strategies for promoting equity. The goal is to develop actionable recommendations for policy change, diversity training, and fostering inclusive leadership.

References

• Banks, K. H. (2016). How Managers Can Promote Healthy Discussions About Race. Harvard Business Review Digital Articles, 2-5.
• Davis, L. E. (2016). Race: America’s grand challenge. Journal of The Society for Social Work and Research, 7(2).
• Hasford, J. (2016). Dominant Cultural Narratives, Racism, and Resistance in the Workplace: A Study of the Experiences of Young Black Canadians. American Journal of Community Psychology, 57(1/2).
• U.S. Equal Employment Opportunity Commission. (n.d.). Race/Color Discrimination. Retrieved June 12, 2017, from https://www.eeoc.gov
• Williams, D. R., & Mohammed, S. A. (2009). Discrimination and racial disparities in health: evidence and needed research. Journal of Behavioral Medicine, 32(1), 20–47.
• Pager, D., & Shepherd, H. (2008). The sociology of discrimination: Racial discrimination in employment, housing, and lending. Annual Review of Sociology, 34, 181–209.
• Feagin, J. R., & Bennet, R. (2014). Systemic Racism and U.S. Society. Routledge.
• Sue, D. W., et al. (2007). Racial microaggressions in everyday life: Implications for clinical practice. American Psychologist, 62(4), 271–286.
• Mor Barak, M. E. (2016). Managing Diversity: Toward a Globally Inclusive Workplace. Sage Publications.
• Cox, T. H., & Blake, S. (1991). Managing cultural diversity: Implications for organizational competitiveness. The Academy of Management Executive, 5(3), 45–56.