Question

# Luther Industries had sales of​ \$980 million and a cost of goods sold of​ \$560 million...

Luther Industries had sales of​ \$980 million and a cost of goods sold of​ \$560 million in 2006.

A simplified balance sheet for the firm appears​ below:

Luther Industries

Balance Sheet

As of December​ 31, 2006​

(millions of​ dollars)

 Assets Liabilities and Equity Cash 25 Accounts payable 60 Accounts receivable 85 Notes payable 425 Inventory 90 Accruals 45 Total current assets 200 Total current liabilities 530 Net​ plant, property, and equipment 6100 Long term debt 2725 Total assets 6300 Total liabilities 3255 Common equity 3045 Total liabilities and equity 6300

​Luther's cash conversion cycle is closest to​ ________.

here inventoey = \$90

cost of goods sold = \$560

DIO= (90/560)*365

DIO = 58.66

Accounts recievable =\$85

since no credit sale is given , we are taking sales = (\$\$980)

DSO=(85/85)*365 = 31.65

Accounts payable= \$60

cost of goods sold = \$560

DPO = (60/560)*365 = 39.10

Cash conversion cycle = DIO + DSO - DPO = 58.66 + 31.65 - 39.10 = 51.21 days

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