Christie Corporation is trying to determine the effect of its inventory turnover ratio and days sales outstanding (DSO) on its cash flow cycle. Christie's 2008 sales (all on credit) were $150,000; and it earned a net profit of 6%, or $9,000. It turned over its inventory 6 times during the year, and its DSO was 36.5 days. The firm had fixed assets totaling $35,000. Christie's payables deferral period is 40 days. a. Calculate Christie's cash conversion cycle. b. Assuming Christie holds negligible amounts of cash and marketable securities, calculate its total assets turnover and ROA. c. Suppose Christie's managers believe that the inventory turnover can be raised to 7.3 times. What would Christie's cash conversion cycle, total assets turnover, and ROA have been if the inventory turnover had been 7.3 for 2008?
Christie Corporation is trying to determine the effect of its inventory turnover ratio and days sales outstanding (DSO) on its cash flow cycle. Christie's 2008 sales (all on credit) were $150,000; and it earned a net profit of 6%, or $9,000. It turned over its inventory 6 times during the year, and its DSO was 36.5 days. The firm had fixed assets totaling $35,000. Christie's payables deferral period is 40 days. a. Calculate Christie's cash conversion cycle. b. Assuming Christie holds negligible amounts of cash and marketable securities, calculate its total assets turnover and ROA. c. Suppose Christie's managers believe that the inventory turnover can be raised to 7.3 times. What would Christie's cash conversion cycle, total assets turnover, and ROA have been if the inventory turnover had been 7.3 for 2008?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Help
Transcribed Image Text:Christie Corporation is trying to determine the effect
of its inventory turnover ratio and days sales
outstanding (DSO) on its cash flow cycle. Christie's
2008 sales (all on credit) were $150,000; and it earned
a net profit of 6%, or $9,000. It turned over its
inventory 6 times during the year, and its DSO was
36.5 days. The firm had fixed assets totaling $35,000.
Christie's payables deferral period is 40 days.
a. Calculate Christie's cash conversion cycle.
b. Assuming Christie holds negligible amounts of cash
and marketable securities, calculate its total assets
turnover and ROA.
C. Suppose Christie's managers believe that the
inventory turnover can be raised to 7.3 times. What
would Christie's cash conversion cycle, total assets
turnover, and ROA have been if the inventory
turnover had been 7.3 for 2008?
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
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, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education