Question

Assets
2018	Amount	Amount		Net Sales		$3,000,000.00
Cash & equivalents		$10,000.00		Variable Cost (75% of sales)		$2,250,000.00
Accounts Receivable		$25,000.00
Inventory		$15,000.00		Gross profit		$750,000.00
Total current assets		$50,000.00
				Fixed Cost		$100,000.00
Net Plant and equipment		$60,000.00		Earnings before interest, taxes dp and amort.		$650,000.00
Total assets		$110,000.00		Depreciation		$35,000.00
				Net OP. Income (EBIT)		$615,000.00
Liabilities and equity				Interest		$12,000.00
Accounts payable		$7,000.00		Earnings before taxes		$603,000.00
Accruals		$3,000.00		Taxes (40%)		$241,200.00
Notes payable		$5,000.00		Net Income		$361,800.00
Total current liabilities		$15,000.00
Long term debts		$35,000.00		Find the following ratios
Total liabilities		$50,000.00		Inventory turnover
Common Equity		$53,000.00		Total asset turnover
Retained earnings		7,000.00		Net profit margin
Total common equity		$60,000.00		Return on equity
Total Liability and equity		$110,000.00
A. The inventory conversion period			ICP
B. Receivables collection period			DSO
C. Payables deferred period			DPO
E. What is the length of the firm's cash conversion cycle?
F. If the annual sales are $2,000,000.00 and all sales are on credit, what is the average balance in accounts receivable?
G. How many times per year is inventory turned over?
H. What would happen to the cash conversion cycle if, on average, inventories could be turned over 12 times per year?

Answer 1