Chastain Corporation is trying to determine the effect of its inventory turnover ratio and days sales outstanding (DS0) on its cash conversion cycle. Chastain's 2019 sales (all on credit) were $117,000, its cost of goods sold is 80% of sales, and it earned a net profit of 2%, or $2,340. It turned over its inventory 7 times during the year, and its DSO was 39.5 days. The firm had fixed assets totaling $37,000. Chastain's payables deferral period is 35 days. Assume 365 days in year for your calculations. a. Calculate Chastain's cash conversion cycle. Do not round intermediate calculations. Round your answer to two decimal places. days b. Assuming Chastain holds negligible amounts of cash and marketable securities, calculate its total assets turnover and ROA. Do not round intermediate calculations. Round your answers to two decimal places. Total assets turnover: ROA: c. Suppose Chastain's managers believe that the inventory turnover can be raised to 9.3 times. What would Chastain's cash conversion cycle, total assets turnover, and ROA have been if the inventory turnover had been 9.3 for 2019? Do not round intermediate calculations. Round your answers to two decimal places. Cash conversion cycle: days Total assets turnover: ROA: %
Chastain Corporation is trying to determine the effect of its inventory turnover ratio and days sales outstanding (DS0) on its cash conversion cycle. Chastain's 2019 sales (all on credit) were $117,000, its cost of goods sold is 80% of sales, and it earned a net profit of 2%, or $2,340. It turned over its inventory 7 times during the year, and its DSO was 39.5 days. The firm had fixed assets totaling $37,000. Chastain's payables deferral period is 35 days. Assume 365 days in year for your calculations. a. Calculate Chastain's cash conversion cycle. Do not round intermediate calculations. Round your answer to two decimal places. days b. Assuming Chastain holds negligible amounts of cash and marketable securities, calculate its total assets turnover and ROA. Do not round intermediate calculations. Round your answers to two decimal places. Total assets turnover: ROA: c. Suppose Chastain's managers believe that the inventory turnover can be raised to 9.3 times. What would Chastain's cash conversion cycle, total assets turnover, and ROA have been if the inventory turnover had been 9.3 for 2019? Do not round intermediate calculations. Round your answers to two decimal places. Cash conversion cycle: days Total assets turnover: ROA: %
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
Related questions
Question
I need help with a finance question
Transcribed Image Text:Chastain Corporation is trying to determine the effect of its inventory turnover ratio and days sales outstanding (DSO) on its cash conversion cycle.
Chastain's 2019 sales (all on credit) were $117,000, its cost of goods sold is 80% of sales, and it earned a net profit of 2%, or $2,340. It turned over its
inventory 7 times during the year, and its DSO was 39.5 days. The firm had fixed assets totaling $37,000. Chastain's payables deferral period is 35 days.
Assume 365 days in year for your calculations.
a. Calculate Chastain's cash conversion cycle. Do not round intermediate calculations. Round your answer to two decimal places.
days
b. Assuming Chastain holds negligible amounts of cash and marketable securities, calculate its total assets turnover and ROA. Do not round
intermediate calculations. Round your answers to two decimal places.
Total assets turnover:
ROA:
%
c. Suppose Chastain's managers believe that the inventory turnover can be raised to 9.3 times. What would Chastain's cash conversion cycle,
total assets turnover, and ROA have been if the inventory turnover had been 9.3 for 2019? Do not round intermediate calculations. Round your
answers to two decimal places.
Cash conversion cycle:
days
Total assets turnover:
ROA:
%
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.Recommended textbooks for you
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Foundations Of Finance
Finance
ISBN:
9780134897264
Author:
KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:
Pearson,
Fundamentals of Financial Management (MindTap Cou…
Finance
ISBN:
9781337395250
Author:
Eugene F. Brigham, Joel F. Houston
Publisher:
Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Finance
ISBN:
9780077861759
Author:
Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:
McGraw-Hill Education