Question
The DBS operations manager has determined that their flagship product experienced 2 turns last year, with an annual sales volume (at cost) of $18,200,000. (Q1),
The DBS operations manager has determined that their flagship product experienced 2 turns last year, with an annual sales volume (at cost) of $18,200,000.
(Q1), What was the average inventory value for this product last year? What would be the average inventory level if inventory turns could be doubled?
(Q2) You have been asked to evaluate DBS's cash-to-cash conversion cycle under the following assumptions: sales of $25 million, cost of goods sold of $18.2 million, 48 operating weeks a year, total average on hand inventory of $9,100,000, accounts receivable equal to $11,455,000, and accounts payable of $12,695,000. What do you conclude? What can you recommend to improve performance?
(Q3) Explain to the DBS operations manager implications of a negative cash-to-cash conversion cycle.
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