Question

Space Enterprises has an inventory conversion period of 55 days, an average collection period of 44...

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.

Homework Answers

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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