Question
1.Last year a company had $1 million average inventory, $ 0.8 million accounts receivable, $0.4 million accounts payable, $ 23 million sales and $ 10
1.Last year a company had $1 million average inventory, $ 0.8 million accounts receivable, $0.4 million accounts payable, $ 23 million sales and $ 10 million cost of goods sold. Estimate the company's inventory conversion period, receivables collection period, payables deferral period, and cash conversion cycle. Draw its cash conversion cycle diagram.
2.A company has an inventory conversion period of 60 days, an average collection period of 35 days, and a payables deferral period of 30 days. Assume that cost of goods sold is 75% of sales.
a) What is the length of the company's cash conversion cycle?
b) If annual sales are $ 4 million and all sales are on credit, what is the company's investment in accounts receivable?
) How many times per year does the company turn over its inventory?
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