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16 Case model 3/22/2010 7:09 Chapter 16. Working Capital Management PART D Assume that SKI’s payables deferral period is 30 days. Now, calculate the firm’s cash conversion c Length of accounting year 365 Payables deferral period 30.00 Days sales outstanding 45.63 Inventory turnover 4.82 CCC = + Inventory conversion period = 75.73 CCC = + CCC = 75.73 + 45.63 30 CCC = 91.36 Discount given on sales (2/10) 2% Collections during month of sale 20% Collections in 2nd month after sale 70% Collections in 3rd month after sale 10% Purchases % of 2nd month sales 85% Target cash balance $1,500 TABLE IC 16-2 Cash Budget for January and February Nov Dec Jan Feb March I. Collections and purchases worksheet (1) Sales (gross) $71,218 $68,212 $65,213 $52,475 $42,909 Collections (2) During month of sale (.2)*(1 - disc) $12,782 $10,285 (3) During first month after sale (.7) $47,748 $45,649 (4) During second month after sale (.1) $7,122 $6,821 (5) Total collections $67,652 $62,755
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16 Case model - 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17...

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