Question

Dewey Corporation has the following data, in thousands. Assuming a 365-day year, what is the firm's cash conversion cycle? Annual sales $53,000 Annual cost of goods sold $32,500 Inventory $5,000 Accounts receivable $3,000 Accounts payable $4,500 O A. 76.81 O B. 20.34 C. 16.89 O D.26.28 O E. 49.85

Answer 1

D.26.28.

first let us know the days inventory outstanding:

average inventory / cost of sales * number of days in a period

=>3.000 / 32.500 *365

=>56.15

now let us know the days sales outstanding:

accounts receivable / total credit sales * number of days

=>3,000 /53,000 *365 days

=>20.66.

now, days payable outstanding

=>accounts payable / cost of goods sold * number of days

=>4,500 / 32,500 * 365

=>50.53

now,

cash converison cycle

=>56.15+20.66-50.53

=>26.28.