{[ promptMessage ]}

Bookmark it

{[ promptMessage ]}

# ch15pp - CHAPTER 15 WORKING CAPITAL MANAGEMENT Inventory...

This preview shows pages 1–2. Sign up to view the full content.

Chapter 15: Working Capital Management Inventory conversion period 1. Kleck Corporation has \$500,000 of inventory, and its annual sales are \$3,000,000. Based on a 365 day year, what is Kleck's inventory conversion period? IC = INV/AVG. DAILY COGS = 500,000/(3,000,000/365) = 61 DAYS Payables deferral period 2. Plummer Products purchases \$3,750,000 of materials each year, and it has an average accounts payable balance of \$350,000. Assuming there are 365 days per year, what is Plummer’s payables deferral period? PD = AP/AVG. DAILY COGS = 350,000/(3,750,000/365) = 34 DAYS Cash conversion cycle 3. Ashwell Corp has \$1,600,000 of sales, \$200,000 of inventories, \$150,000 of receivables, and \$100,000 of payables. Its cost of goods sold is 70% of sales. What is Ashwell’s cash conversion cycle (CCC)? CCC = (INV/AVG. DAILY COGS) + (AR/AVG. DAILY SALES) – (AP/AVG. DAILY COGS). CCC = 200,000/(1,120,000/365) + 150,000/(1,600,000/365) – 100,000/(1,120,00/365) = 65+34-33 = 66 DAYS Cash conversion cycle 4. Okemos Technologies' annual sales are \$5,000,000, and it purchases \$3,400,000 of materials each year (and this is its cost of goods sold). Okemos also has \$550,000 of inventory, \$525,000 of accounts receivable, and \$450,000 of accounts payable.

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}