Techno Innovations is evaluating its working capital policies. Last year, the company had credit sales of $4,100,000, and its net profit margin was 8%. Its inventory turnover was 5.5 times, and its DSO was 47 days. The company's annual cost of goods sold (COGS) was $2,150,000, and it had fixed assets of $620,000. The firm's payables deferral period was 50 days. Required: Calculate Techno's cash conversion cycle (CCC).

Techno Innovations is evaluating its working capital policies. Last year, the company had credit sales of $4,100,000, and its net profit margin was 8%. Its inventory turnover was 5.5 times, and its DSO was 47 days. The company's annual cost of goods sold (COGS) was $2,150,000, and it had fixed assets of $620,000. The firm's payables deferral period was 50 days. Required: Calculate Techno's cash conversion cycle (CCC).

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter21: Supply Chains And Working Capital Management

Section: Chapter Questions

Problem 12P: Strickler Technology is considering changes in its working capital policies to improve its cash flow...

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Strickler Technology is considering changes in its working capital policies to improve its cash flow cycle. Strickler's sales last year were $3,250,000 (all on credit), and its net profit margin was 7%. Its inventory turnover was 6.0 times during the year, and its DSO was 41 days. Its annual cost of goods sold was $1,800,000. The firm had fixed assets totaling $535,000. Strickler's payables deferral period is 45 days. (16-12) Working Capital Cash Flow Cycle a. Calculate Strickler's cash conversion cycle. b. Assuming Strickler holds negligible amounts of cash and marketable securities, calculate its total assets turnover and ROA. C. Suppose Strickler's managers believe the annual inventory turnover can be raised to 9 times without affecting sale or profit margins. What would Strickler's cash conversion cycle, total assets turnover, and ROA have been if the inventory turnove had been 9 for the year?
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