Question

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

Answer #1

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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Problem 16-11
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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...

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Problem 16-11
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