the same question is answered incorrectly online Quantitative Problem: Winston I
ID: 2794708 • Letter: T
Question
the same question is answered incorrectly online
Quantitative Problem: Winston Inc. is trying to determine the effect of its inventory turnover ratio and days sales outstanding on its cash conversion cycle. Winston's 2013 sales (all on credit) were $109,000 and its cost of goods sold was 75% of sales. It turned over its inventory 8.91 times during the year. Its receivables balance at the end of the year was $13,156.96 and its payables balance at the end of the year was $7,398.97. Using this information calculate the firm's cash conversion cycle. Round your answer to the nearest whole. Round the days amounts in your intermediate calculations to the nearest whole day. Do not round other intermediate calculations.
Explanation / Answer
DIO=365/inventory turnover=365/8.91=40.96521
DSO=365/(credit sales/accounts receivable)=365/(109000/13156.96)=44.05771
DPO=365/(cost of sales/accounts payable)=365/(75%*109000/7398.97)=33.03516
Cash conversion cycle=DIO+DSO-DPO=40.96521+44.05771-33.03516=51.98776
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