Question

Winston Inc. is trying to determine the effect of its inventory turnover ratio and days sales outstanding on its cash conversion cycle. Winston's 2015 sales (all on credit) were $162,000 and its cost of goods sold was 75% of sales. It turned over its inventory 8.4 times during the year. Its receivables balance at the end of the year was $13,143.36 and its payables balance at the end of the year was $7,404.47. Using this information calculate the firm's cash conversion cycle. Round the days amounts in your intermediate calculations to the nearest whole day. Do not round other intermediate calculations. Round your answer to the nearest whole number.
  days

Answer 1

cash conversion cycle = Days inventory outstanding+Days sales outstanding-Days payable outstanding

                = 43 +30 -22

                 = 51 days

	Formula
Days inventory outstanding	365/Inventory turnover	365/8.4=43.45238 (rounded to 43)
Days sales outstanding	365*accounts receivable /net credit sales	365*13143.36/162000 29.61 (rounded to 30 )
Days payable outstanding	365*Accounts payable /cost of sales	365*7404.47/121500 22.24 (rounded to 22 days)

**cost of sales = 162000*75%= 121500