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The 2015 and 2016 balance sheets for Steele Electric showed Cash of $ 6,700 and $...

The 2015 and 2016 balance sheets for Steele Electric showed Cash of $ 6,700 and $ 8,200 respectively, Accounts Receivable of $ 15,000 and $ 18,000 , respectively, Inventory of $ 11,500 and $ 8,500 , respectively, and Accounts Payable of $ 5,500 and $ 8,500 , respectively. Its 2016 Income Statement showed Net Sales of $ 118,000 , Cost of Goods Sold of $ 57,000, and Net Income of $ 33,000. The cash conversion cycle for 2016 was: (Assume all Sales are credit sales. Round any intermediary calculations to two decimal places and your final answer to the nearest day.)

A. 64days.

B. 70 days.

C. 58 days.

D. 32days

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Answer #1
Answer
Cash Conversion Cycle Formula = Days Inventory Outstanding (DIO)+
Days Sales Outstanding (DSO) - Days Payable Outstanding (DPO)
54.75 + 54.75 - 54.75 = 54.75 Days
Nearest to 58 days Answer (c)
Days Inventory Outstanding (DIO) = Inventory (2016) / Cost of Goods Sold x 365
$8,500 / $ 57,000 x 365
0.15 x 365 = 54.75
Days Inventory Outstanding (DIO) = Account Receivable (2016) / Net Credit Sales x365
$ 18,000 / $ 118,000 x 365
0.15 x 365 = 54.75
Days Payable Outstanding (DPO) = Account Payable (2016) / Cost of Goods sold x 365
$8,500 / $ 57,000 x 365
0.15 x 365 = 54.75
Note Intermediary calculations are Rounded to two decimals
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