As an intern at Crescent Corporation, you are asked to evaluate the companys cash flow cycle. The companys annual sales were $250,000 with a net profit margin of 8% and fixed asset turnover ratio of 4 times. The companys inventory turnover ratio, based on sales figure, was 7. The company collected its receivables in 28 days on average while its payables deferral period extended 35 days. (Hint: Use Sales/Inventories as the Inventory Turnover measure whenever necessary in the following questions).

part b and c

Question b of problem:

1. You are then asked to compute Crescents total asset turnover and return on assets assuming that the companys cash holding is negligible.

Question c of problem:

1. Finally, you are asked to analyze the impact of an increase on companys inventory turnover ratio on its cash cycle. Specifically, what would happen to Crescents cash cycle, total asset turnover, and return on assets if the company can bring to its ITO to industry average of 9?