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 2018 sales (all on credit) were $106,000; its cost of goods sold is 80% of sales; and it earned a net profit of 4%, or $4,240. It turned over its inventory 6 times during the year, and its DSO was 40 days. The firm had fixed assets totaling $27,000. Chastain's payables deferral period is 35 days. Assume 365 days in year for your calculations. Calculate Chastain's cash conversion cycle. Do not round intermediate calculations. Round your answer to two decimal places. days 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 % Suppose Chastain's managers believe that the inventory turnover can be raised to 9.4 times. What would Chastain's cash conversion cycle, total assets turnover, and ROA have been if the inventory turnover had been 9.4 for 2018? Do not round intermediate calculations. Round your answers to two decimal places. Cash conversion cycle days Total assets turnover ROA %

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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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 2018 sales (all on credit) were $106,000; its cost of goods sold is 80% of sales; and it earned a net profit of 4%, or $4,240. It turned over its inventory 6 times during the year, and its DSO was 40 days. The firm had fixed assets totaling $27,000. Chastain's payables deferral period is 35 days. Assume 365 days in year for your calculations.

Calculate Chastain's cash conversion cycle. Do not round intermediate calculations. Round your answer to two decimal places.
days

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 %

Suppose Chastain's managers believe that the inventory turnover can be raised to 9.4 times. What would Chastain's cash conversion cycle, total assets turnover, and ROA have been if the inventory turnover had been 9.4 for 2018? Do not round intermediate calculations. Round your answers to two decimal places.

Cash conversion cycle days

Total assets turnover

ROA %

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