Question

Space Enterprises has an inventory conversion period of 55 days, an average collection period of 44 days, and a payables deferral period of 29 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? 62 days If Space's annual sales are $3,432,450 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 Space Enterprises turn over its inventory? Round your answer to two decimal places. Do not round intermediate calculation.

Answer #1

**The length of the firm's cash
conversion cycle**

The firm's cash conversion cycle = Average collection period + Inventory conversion period - payables deferral period

= 44.00 Days + 55.00 Days – 29.00 Days

= 70.00 Days

**Firm's investment in accounts
receivable**

Firm's investment in accounts receivable = Sales x [Average collection period / 365 Days]

= $3,432,450 x [44.00 Days / 365 Days]

= $413,774.79

**Inventory Turnover ratio**

Inventory Turnover ratio = 365 Days / Inventory conversion period

= 365 Days / 55.00 Days

= 6.64 Days

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