The American Flag Corporation (AFC) wants to determine the effect of its inventory turnover and days sales

Question:

The American Flag Corporation (AFC) wants to determine the effect of its inventory turnover and days sales outstanding (DSO) on its cash flow cycle. Last year, AFC's sales (all on credit) were $468,000, and it had a net profit margin of 8 percent. The cost of goods sold is 60 percent of sales. Inventory was turned over 12 times during the year, and the DSO was 42 days. The firm had negligible amounts of cash and marketable securities, and its fixed assets were $150,000. AFC's payables deferral period is 35 days.

A) Calculate AFC's cash conversion cycle

B) Calculate AFC's total assets turnover and return on assets (ROA)

Cash Conversion Cycle
Cash conversion cycle measures the total time a business takes to convert its cash on hand to produce, pay its suppliers, sell to its customers and collect cash from its customers. The process starts with purchasing of raw materials from suppliers,... Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may...