Negus Enterprises has an inventory conversion period of 62 days, an average collection period of 45 days, and a payables deferral period of 20 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 $3,824,775 and all sales are on credit, what is the firm's investment in accounts receivable? Round your answer to the nearest dollar. Do not round intermediate calculation.
$ How many times per year does Negus Enterprises turn over its inventory? Round your answer to two decimal places. Do not round intermediate calculation. x
1
Operating cycle = days of sales outstanding + days of inventory on hand |
Operating cycle = 45+62 |
Operating cycle = 107 |
Cash conversion cycle = Operating cycle - days of payables outstanding |
Cash cycle = 107-20 |
Cash cycle = 87 |
2
days of sales outstanding = number of days in a year/receivables turnover |
45 = 365/Receivables turnover |
Receivables turnover = 8.11 |
Receivables turnover = Credit sales/receivables |
8.11 = 3824775/Receivables |
Receivables = 471612.21 |
3
days of inventory on hand = number of days in a year/inventory turnover |
62 = 365/inventory turnover |
inventory turnover = 5.89 |
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