Question

Consider the case of Teal Monkey Manufacturers:

Teal Monkey Manufacturers is a mature firm that has a stable
flow of business. The following data was taken from its financial
statements last year:

Annual Sales | $9,500,000 |

Cost of goods sold | $6,650,000 |

Inventory | $2,900,000 |

Accounts receivable | $1,800,000 |

Accounts payable | $2,600,000 |

Teal Monkey’s CFO is interested in determining the length of time funds are tied up in working capital. Use the information in the preceding table to complete the following table. (Note: Use 365 days as the length of a year in all calculations, and round all values to two decimal places.)

Value | |

Inventory Conversion Period | 159.17; 57.89; 41.35; or 49.62 |

Average collection period | 26.01; 30.12; 69.16; or 21.90 |

Payables Deferral Period | 42.02; 142.71; 56.84; or 51.90 |

Cash conversion cycle | 85.62; 39.70; 6.39; or 29.77 |

Answer #1

**Inventory conversion period is computed as shown
below:**

**= (Inventory / cost of goods sold) x 365**

= ($ 2,900,000 / $ 6.650,000) x 365

**= 159.17 days Approximately**

**Average collection period is computed as
follows:**

**= (Accounts receivable / Sales) x 365**

= ($ 1,800,000 / $ 9,500,000) x 365

**= 69.16 days Approximately**

**Payable deferral period is computed as
follows:**

**= (Accounts payable / cost of goods sold) x
365**

= ($ 2,600,000 / $ 6,650,000) x 365

**= 142.71 days Approximately**

**Cash conversion cycle is computed as
follows:**

**= Inventory conversion period + Average collection
period - Payables deferral period**

= 159.17 days + 69.16 days - 142.71 days

**= 85.62 days**

Consider the case of Teal Monkey Manufacturers:
Teal Monkey Manufacturers is a mature firm that has a stable
flow of business. The following data was taken from its financial
statements last year:
Annual sales
$10,500,000
Cost of goods
sold
$7,140,000
Inventory
$2,800,000
Accounts
receivable
$1,800,000
Accounts
payable
$2,800,000
Teal Monkey’s CFO is interested in determining the length of
time funds are tied up in working capital. Use the information in
the preceding table to answer the following questions.
(Note: Use...

Consider the case of Teal Monkey Manufacturers:
Teal Monkey Manufacturers is a mature firm that has a stable
flow of business. The following data was taken from its financial
statements last year:
Annual sales
$10,500,000
Cost of goods sold
$6,825,000
Inventory
$3,200,000
Accounts receivable
$2,100,000
Accounts payable
$2,700,000
Teal Monkey’s CFO is interested in determining the length of
time funds are tied up in working capital. Use the information in
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Inventory
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Accounts
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