Question

Marshall Inc. recently hired your consulting firm to improve the company's performance. It has been highly profitable but has been experiencing cash shortages due to its high growth rate. As one part of your analysis, you want to determine the firm's cash conversion cycle. Using the following information and a 365 day year, what is the firm's present cash conversion cycle? Enter your answer rounded to two decimal places. For example, if your answer is 123.45% or 1.2345 then enter as 1.23 in the answer box. Average Inventory = $80,000.00 Annual Sales = $625,000.00 Annual Cost of Goods Sold = $350,000.00 Average Accounts Receivable = $170,000.00 Average Accounts Payable = $30,000.00

Answer #1

**The cash conversion cycle is computed as shown
below:**

**= Days sales outstanding + days of inventory outstanding
- days of payable outstanding**

**Days sales outstanding is computed as
follows:**

**= (Average accounts receivable / Annual Sales) x
365**

= ($ 170,000 / $ 625,000) x 365

**= 99.28 days**

**Days of inventory outstanding is computed as
follows:**

**= (Average Inventory / Cost of Goods Sold) x
365**

= ($ 80,000 / $ 350,000) x 365

**= 83.42857143 days**

**Days of payable outstanding is computed as
follows:**

**= (Average Accounts Payable / Cost of Goods Sold) x
365**

= ($ 30,000 / $ 350,000) x 365

**= 31.28571429 days**

**So, the cash conversion cycle is computed as
follows:**

= 99.28 days + 83.42857143 days - 31.28571429 days

**= 151.42 days Approximately**

Feel free to ask in case of any query relating to this question

Marshall Inc. recently hired your consulting firm to improve the
company's performance. It has been highly profitable but has been
experiencing cash shortages due to its high growth rate. As one
part of your analysis, you want to determine the firm's cash
conversion cycle. Using the following information and a 365 day
year, what is the firm's present cash conversion cycle? Enter your
answer rounded to two decimal places. For example, if your answer
is 123.45% or 1.2345 then enter...

Marshall Inc. recently hired your consulting firm to improve the
company's performance. It has been highly profitable but has been
experiencing cash shortages due to its high growth rate. As one
part of your analysis, you want to determine the firm's cash
conversion cycle. Using the following information and a 365 day
year, what is the firm's present cash conversion cycle? Enter your
answer rounded to two decimal places. For example, if your answer
is 123.45% or 1.2345 then enter...

You have recently been hired to improve the performance of
Shortage Inc. which has been experiencing a severe cash shortage.
As one part of your analysis, you want to determine the firm's cash
conversion cycle. Using the following information, what is your
estimate of the firm's current cash conversion cycle?
Current inventory = $150,000
Accounts receivable = $220,000
Accounts payable = $140,000
Annual sales = $1,200,000
Cost of Goods Sold = $600,000
Purchases credit terms: net 30 days
Receivables credit...

You have recently been hired to improve the performance of
Multiplex Corporation which has been experiencing a severe cash
shortage. As one part of your analysis, you want to determine the
firm's cash conversion cycle. Using the following information and a
360-day year, what is your estimate of the firm's current cash
conversion cycle?
Current inventory = $125,000
Annual sales = $600,000
Accounts receivable = $160,000
Accounts payable = $25,000
Total annual purchases = $360,000
Purchases credit terms: net...

A business analysis has recently been hired to improve the
performance of a firm. As one part of your analysis, the analyst
wants to determine the firm’s cash conversion cycle. Using the
following information and a 365-day year: Current inventory =
$2,000,000; Annual sales = $10,000,000; Accounts receivable =
$657,534; Accounts payable = $657,534; Cost of goods sold =
$8,000,000. Calculate the firm’s inventory conversion cycle.
27 days
73 days
65 days
95 days
Based on information from Question 46,...

Increased Efficiency, Inc. is looking for ways to shorten its
cash conversion cycle. It has annual sales of $36,500,000, or
$100,000 a day on a 365-day basis. The firm's cost of goods sold is
70% of sales. On average, the company has $9,000,000 in inventory
and $8,000,000 in accounts receivable. Its CFO has proposed new
policies that would result in a 20% reduction in both average
inventories and accounts receivable. She also anticipates that
these policies would reduce sales by...

Increased Efficiency, Inc. is looking for ways to shorten its
cash conversion cycle. It has annual sales of $36,500,000, or
$100,000 a day on a 365-day basis. The firm's cost of goods sold is
75% of sales. On average, the company has $9,000,000 in inventory
and $8,000,000 in accounts receivable. Its CFO has proposed new
policies that would result in a 20% reduction in both average
inventories and accounts receivable. She also anticipates that
these policies would reduce sales by...

Increased Efficiency, Inc. is looking for ways to shorten its
cash conversion cycle. It has annual sales of $36,500,000, or
$100,000 a day on a 365-day basis. The firm's cost of goods sold is
80% of sales. On average, the company has $9,000,000 in inventory
and $8,000,000 in accounts receivable. Its CFO has proposed new
policies that would result in a 20% reduction in both average
inventories and accounts receivable. She also anticipates that
these policies would reduce sales by...

Whitson Co. is looking for ways to shorten its cash conversion
cycle. It has annual sales of $45,625,000, or $125,000 a day on a
365-day basis. The firm's cost of goods sold is 60% of sales. On
average, the company has $7,500,000 in inventory, $5,750,000 in
accounts receivable, and $2,750,000 in accounts payable. Its CFO
has proposed new policies that would result in a 25% reduction in
both average inventories and accounts receivable, and a 10%
increase in average accounts...

Problem 16-11
Cash Conversion Cycle
Negus Enterprises has an inventory conversion period of 62 days,
an average collection period of 35 days, and a payables deferral
period of 36 days. Assume that cost of goods sold is 80% of sales.
Assume 365 days in year for your calculations.
What is the length of the firm's cash conversion cycle?
days
If Negus's annual sales are $3,705,000 and all sales are on
credit, what is the firm's investment in accounts receivable? Round...

ADVERTISEMENT

Get Answers For Free

Most questions answered within 1 hours.

ADVERTISEMENT

asked 3 minutes ago

asked 23 minutes ago

asked 30 minutes ago

asked 32 minutes ago

asked 35 minutes ago

asked 48 minutes ago

asked 48 minutes ago

asked 58 minutes ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago