Question
Cash conversion cycle Christie Corporation is trying to determine the effect of its inventory turnover ratio and days sales outstanding (DSO) on its cash conversion
Cash conversion cycle
Christie Corporation is trying to determine the effect of its inventory turnover ratio and days sales outstanding (DSO) on its cash conversion cycle. Christie's 2012 sales (all on credit) were $222,000; its cost of goods sold is 80% of sales; and it earned a net profit of 4%, or $8,880. It turned over its inventory 4 times during the year, and its DSO was 31.5 days. The firm had fixed assets totaling $26,000. Christie's payables deferral period is 35 days. Assume 365 days in year for your calculations.
a. Calculate Christie's cash conversion cycle. Round your answer to two decimal places.
________days (Please help, not sure how to work this part/ my answer was incorrect)
b. Assuming Christie holds negligible amounts of cash and marketable securities, calculate its total assets turnover and ROA. Round your answer to two decimal places.
Total assets $_________ (I worked this part, correct answer $100,658.90)
ROA __________% (I worked this part, correct answer8.82%)
c. Suppose Christie's managers believe that the inventory turnover can be raised to 8.3 times. What would Christie's cash conversion cycle, total assets turnover, and ROA have been if the inventory turnover had been 8.3 for 2012?
Cash conversion cycle ______days (Please help, the answer I worked for this section was incorrect)
Total assets $________ (I worked this part, correct answer is 71,905.89)
ROA_______ % (I worked this part, correct answer is 12.35%)
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started