Aaish-o-Ishrat Technology is considering changes in the working capital policies to improve its cash flow cycle. Thecompany's sales last year were Rs 3,250,000 (all on credit) and its net profit margin was 7%. Its inventory turnover was6.0 X during the year, and its DSO was 41 days. The annual cost of goods sold was Rs 1,800,000. The company hasfixed assets totaling Rs 535,000. The company's payables deferral period is 45 days. Required: (a) Calculate thecompany's cash conversion cycle. (b) Assuming the company hold a negligible amount of cash and marketable securities, calculate its total asset turnover, and ROA. (c) Suppose the company's managers believe the annual inventory turnovercan be raised to 9 times without affecting sales, what will be the company's cash conversion cycle, total assets turnover,and ROA have been if inventory turnover had been 9 times for the year?

Given data sales = 3,250,000net profit margin = 7%sales outstanding = 41 daysinventory turn over = 6…

Answered: Aaish-o-Ishrat Technology is…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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