Question
The Flamingo Corporation is trying to determine the effect of its inventory turnover ratio and days sales outstanding (DSO) on its cash flow cycle. Last
The Flamingo Corporation is trying to determine the effect of its inventory turnover ratio and days sales outstanding (DSO) on its cash flow cycle. Last year, Flamingos sales (all on credit) were $180,000 and its cost of goods sold were 85 percent of sales. Inventory was turned over eight times during the year, and the accounts receivable turnover was 10. Flamingos payables deferral period is 30 days.
- Calculate Flamingos cash conversion cycle
- Compute the average balances in accounts receivable, accounts payable and inventory
Identify your final answer with a proper label and double underline.
Begin by identifying what you know:
Sales =
Cost of goods sold =
Inventory turnover =
Accounts receivable turnover =
DPO =
Stratosphere Wireless is examining its cash conversion cycle. The company expects its cost of goods sold, which equal 80 percent of sales, to equal $480,000 this year. Stratosphere normally turns over inventory 24 times per year, accounts receivable are turned over 15 time per year and the account payable turnover is 40.
- Calculate the cash conversion cycle
- Calculate the average balances in accounts receivable, accounts payable and inventory
Identify your final answer with a proper label and double underline.
Begin by identifying what you know:
Cost of goods sold = $
Cost of goods sold =
Inventory Turnover =
Accounts Receivable Turnover =
Accounts Payable Turnover =
Discussion questions:
- Flamingo Corporation wants to reduce its CCC. They feel that turning their inventory every 45 days is good and are happy with this trend. Using actual days that you have calculated, what can they do with their payables and receivables to obtain this goal? Your response should be at least 75 words without counting a repeat of the question or other non-informative sentences.
- Between the two companies, which one has the best CCC? Explain why their CCC is stronger than the other one by discussing which components are stronger. Your response should be at least 75 words without counting a repeat of the question or other non-informative sentences.
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