The Greek Connection had sales of $30.6 million and a cost of goods sold of $12.

Question

The Greek Connection had sales of $30.6 million and a cost of goods sold of $12.2 million in 2015. A simplified balance sheet for the firm appears below THE GREEK CONNECTION Balance Sheet as of December 31, 2015 (thousands of dollars) Assets Cash Accounts receivable Inventory Total current assets Net plant, property, and equipment Total assets Liabilities and Equity $2,076 Accounts payable $1,709 1,000 1,220 $3,929 $3,000 $6,929 3,478 Notes payable 1,525 Accruals $7,079Total current liabilities $8,500 Long-term debt $15,579 To liabilities

Explanation / Answer

a. net working capital = total current assets - total current liabilties

= 7079 - 3929

= $3150

b. Cash conversion cycle = [inventory / cost of goods sold *365] + [accounts receivable/sales * 365] - [accounts payable / cost of goods sold *365]

= [1525 / 12200 * 365 ] + [3478 / 30600 * 365] - [1709 / 12200 * 365]

= 45.63 days + 41.49 days - 51.13 days

= 35.99 days

c   Cash conversion cycle = 45.63 days + 30 days - 51.13 days

= 24.5 days

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