Question

Using Exhibit 1, prepare a table to analyze and compare the changes in key financial KPIs between 2008 and 2009, as follows:

• Inventory growth rate, inventory turns, and sales growth
• Net Working Capital and Days Working Capital
• DIO, DSO, DPO, and CCC

Dio: days inventory outstanding

DSO: days sales outstanding

DPO: days payable outstanding (accounts payable, what is owed to suppliers)

CCC Cash to cash conversion

Trying to double-check my solution, ty for the help

Exhibit 1: Select Income Statement and Balance Sheet Values ($MM)
Income Statement Accounts	2008	2009
Net sales	65.0	86.3
Expenses
Cost of goods sold	29.0	38.9
Sales, general and administrative	10.1	14.0
Research and development	13.5	17.0
Depreciation	2.9	3.1
Other expenses	0.6	1.0
Operating expenses	56.1	74.0
Interest expense	2.4	3.0
Taxes	2.0	2.9
Net earnings	4.5	6.5
Balance Sheet Accounts	2008	2009
Assets
Cash	3.2	3.4
Receivables	3.0	4.0
Inventory	4.9	8.7
Prepaid expenses	4.8	6.1
Current assets	15.9	22.2
Plant property and equipment	28.5	32.9
Other long term assets	2.7	4.3
Total long term assets	31.2	37.2
Total assets	47.1	59.4
Liabilities & Equity
Short term debt	2.7	3.2
Accounts payable	2.3	3.0
Accrued liabilities	0.4	0.5
Current liabilities	5.4	6.7
Long term debt	17.2	21.7
Owners equity	24.5	31.0
Total capitalization	41.7	52.7
Total liabilities & equity	47.1	59.4
Months of inventory	2.028	2.690
Cost of goods sold / sales	0.446	0.451
Long term debt / total capital	0.412	0.412

Answer 1

1) Inventory growth rate = COGS/average inventory= 38.9/6.8= 5.72

average inventory = opening inventory + Closing inventory/2 = 4.9+8.7/2 = 6.8

2) Sales growth = CY sales - Py sales/py sales *100 = 38.9 - 29/29 * 100 = 34.1%

3) Net Working capital = Current liabilties - current assets = 6.7 - 22.2 = (15.5)

4) Days working capital = Avg working capital/sales revenue * 365 = 15.5/86.3*365 = 65.5 days

5) DIO= average inventory/COGS*365 = 6.8/38.9*365= 63.8 days

6) DSO= avg account recievable/sales*365 = 14.8 days

7) DPO= avg account payable/cogs * 365 = 2.075/38.9 * 365 = 19.4 days

8) CCC = DSO+DIO-DPO= 14.8+63.8-19.4= 59.2