Julekhaconversion period of 50 days, an averagecullecuion period (DSO) uf 35 lays, and apayables deferral period of 25 days.Assume that cost of goods sold is 80% ofEnterprises has an inventorysales. Julekha's annual cost of labour isTk.550,00N) and annual cost of materials isTk.750,000. ASsume a year = 360 days.a. What is the length of the firm's cashconversion cycle?b. IIannualSalesNegus'Tk.4,380,(00) and all sales are oncredit, what is the fim's investment indCCDunts recrivahle?c. How many times per year does NegusEnterprises turn over its inventory?d. How much working capital linancingdoes Negus have to ensure to completethe cash convPision cycleare

Formulas: Cash conversion cycle = Inventory conversion period + Receivables collection period -…

Answered: nd annual Assume a

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter18: The Management Of Accounts Receivable And Inventories

Section: Chapter Questions

Problem 17P

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Question

Julekha
conversion period of 50 days, an average
cullecuion period (DSO) uf 35 lays, and a
payables deferral period of 25 days.
Assume that cost of goods sold is 80% of
Enterprises has an inventory
sales. Julekha's annual cost of labour is
Tk.550,00N) and annual cost of materials is
Tk.750,000. ASsume a year = 360 days.
a. What is the length of the firm's cash
conversion cycle?
b. II
annual
Sales
Negus'
Tk.4,380,(00) and all sales are on
credit, what is the fim's investment in
dCCDunts recrivahle?
c. How many times per year does Negus
Enterprises turn over its inventory?
d. How much working capital linancing
does Negus have to ensure to complete
the cash convPision cycle
are

Expert Solution

Step 1

Formulas:

Cash conversion cycle = Inventory conversion period + Receivables collection period - Payables deferral period.
Investment in accounts receivable = Receivable collection period/360*Net sales.
Inventory turnover ratio = 360/Inventory conversion period.

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