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Corporate Fin Focused Approach

5th Edition

ISBN:9781285660516

Author:EHRHARDT

Publisher:EHRHARDT

Chapter16: Supply Chains And Working Capital Management

Section: Chapter Questions

Problem 11P

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Question

The Greek Connection had sales of

$32.1

million and a cost of goods sold of

$12.8

million in 2013. A simplified balance sheet for the firm appears below:

a. Calculate The Greek Connection's net working capital in 2013.

b. Calculate the cash conversion cycle of The Greek Connection in 2013.

c. The industry average accounts receivable days is 30 days. What would have been the cash conversion cycle for The Greek Connection in 2013 had it met the industry average for accounts receivable days? (Hint: Use a 365-day year.)

Assets Liabilities and Equity
Cash $2,344 Accounts payable $1,600
Accounts receivable 4,155 Notes payable 1,000
Inventory 1,325 Accruals 1,220
Total current assets $7,824 Total current liabilities $3,820
Net plant, property, and equipment $8,500 Long-term debt $3,000
Total assets $16,324 Total liabilities $6,820
Common equity $9,504
Total liabilities and equity $16,324

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