An analyst has recently been hired to improve the perfomance of SL plant corpora
ID: 2484494 • Letter: A
Question
An analyst has recently been hired to improve the perfomance of SL plant corporation, which has been experiencing a severe cash shortage. As one part of your analysis. the analyst wants to determine the firm's cashh conversion cycle. Using thefollowing informatin and a 365-day year. current inventory = $150,000, annual sales = $730,000; Accounts receivable = $180,000, accounts payable = $36,000. Total annual purchases = $365,000. Calculate the firm's inventory conversion cycle.
a) 18 days
b) 70 days
c) 75 days
d) 90 days
Explanation / Answer
The inventory conversion cycle is the is the time required to aquire raw materials, manufacture/process it and then sell it and it is calculated using below formula
Inventory conversion cycle = Inventory / Cost of Sales /365
Assuming the Sales given here is the cost of Inventory Sold
A Current inventory 1,50,000 B annual sales 7,30,000 C Accounts receivable 1,80,000 D accounts payable 36,000 E Total annual purchases 3,65,000Related Questions
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