Question
Mako Industries is considering changes in its working capital policies to improve its cash flow cycle. Mako's sales last year were $4.5 million (all on
Mako Industries is considering changes in its working capital policies to improve its cash flow cycle. Mako's sales last year were $4.5 million (all on credit), and its net profit margin was 8%. Its inventory turnover was 7.0 times during the year, and its DSO was 42 days. Its annual cost of goods sold was $3.15 million. The firm had fixed assets totaling $550,000. Mako's payables deferral period is 46 days.
Suppose Mako's managers believe the annual inventory turnover can be raised to 8 times without affecting sale or profit margins. What would Mako's ROA have been if the inventory turnover had been 8 for the year?
Group of answer choices
29.42%
22.46%
24.63%
33.14%
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