Your consulting firm was recently hired to improve the performance of Shin-Soene

Question

Your consulting firm was recently hired to improve the performance of Shin-Soenen Inc, which is highly profitable but has been experiencing cash shortages due to its high growth rate. As one part of your analysis, you want to determine the firm’s cash conversion cycle. Using the following information and a 365-day year, what is the firm’s present cash conversion cycle?

Average inventory =
$75,000
Annual sales =
$875,000
Annual cost of goods sold =
$525,000
Average accounts receivable =
$160,000
Average accounts payable =
$25,000
Answer
a. 107.6 days
b. 105.6 days
c. 118.8 days
d. 101.5 days
e. 79.2 days

Explanation / Answer

d. 101.5 days
Working: Inventory Turnover =( Average Inventory / Cost of Goods Sold ) * 365 = (75000 / 525000) * 365 = 52.14 days Accounts Receivable Turnover = (Average Accounts Receivables / Credit Sales ) * 365 = (160000 / 875000) * 365 = 66.74 days Accounts Payble Turnover = (Average Accounts Payble / Cost of Goods Sold) * 365 = (25000 / 525000) * 365 = 17.38 days Cash Convertion Cycle = 52.14 + 66.74 - 17.38 = 101.5 days Thank you.... Inventory Turnover =( Average Inventory / Cost of Goods Sold ) * 365 = (75000 / 525000) * 365 = 52.14 days Accounts Receivable Turnover = (Average Accounts Receivables / Credit Sales ) * 365 = (160000 / 875000) * 365 = 66.74 days Accounts Payble Turnover = (Average Accounts Payble / Cost of Goods Sold) * 365 = (25000 / 525000) * 365 = 17.38 days Cash Convertion Cycle = 52.14 + 66.74 - 17.38 = 101.5 days

Related Questions

Navigate

• Browse (All)
• Browse Y
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.