Question

Compute Cash Conversion Cycle for Competing Firms Halliburton and Schlumberger compete in the oil field services sector. Refer to the following 2018 financial data for the two companies to answer the requirements. $ millions HAL SLB Total revenue Cost of sales and services Average accounts receivable Average inventory Average accounts payable $23,995 $32,815 21,009 28,478 5,135 7,983 2,712 4,028 2,786 10,130 a. Compute the following measures for both companies. Note: Round your final answers to one decimal place (for example, enter 6.8 for 6.77555). HAL SLB 80.5 X 91.5 x 48.6 x 53.2 x 1. Days sales outstanding (DSO) 2. Days inventory outstanding (DIO) 3. Days payables outstanding (DPO) 4. Cash conversion cycle (CCC) 49.9 X 133.8 X 79.2 x 10.9 X

Answer 1

Ans.		HAL	SLB
	Days sales outstanding (DSO)	78.1	88.8
	Days inventory outstanding (DIO)	47.1	51.6
	Days payable outstanding (DPO)	48.4	129.8
	Cash Conversion Cycle (CCC)	76.8	10.6
	*Working notes :
	*Calculations for Days sales outstanding :
	Days sales outstanding = 365 / Total revenue * Average accounts receivable
HAL	365 / $23,995 * $5,135	78.1
SLB	365 / $32,815 * $7,983	88.8
	*Calculations for Days inventory outstanding :
	Days inventory outstanding = 365 / Cost of sales and services * Average inventory
HAL	365 / $21,009 * $2,712	47.1
SLB	365 / $28,478 * $4,028	51.6
	*Calculations for Days payables outstanding :
	Days payable outstanding = 365 / Cost of sales and services * Average accounts payable
HAL	365 / $21,009 * $2,786	48.4
SLB	365 / $28,478 * $10,130	129.8
	*Calculations for Cash conversion cycle :
		HAL	SLB
	Days sales outstanding	78.1	88.8
	Add: Days inventory outstanding	47.1	51.6
	Less: Days payable outstanding	-48.4	-129.8
	Cash Conversion Cycle	76.8	10.6