Mako Industries is considering changes in its working capital policies to improveits cash flow cycle. Mako's sales last year were $6.0 million (all on credit), and itsnet profit margin was 8%. Its inventory turnover was 7.0 times during the year,and its DSO was 45 days. Its annual cost of goods sold was $4.20 million. Thefirm had fixed assets totaling $600,000. Mako's payables deferral period is 30days.Suppose Mako's managers believe the annual inventory turnover can be raisedto 8 times without affecting sale or profit margins. What would Mako's ROAhave been if the inventory turnover had been 8 for the year?O 25.74%O 21.03%O 24.33%O 26.57%

Cash flow cycle refers to the overall process a business entity takes to convert its cash outflows…

Suppose Mako's managers believe the annual inventory turnover can be raised to 8 times without affecting sale or profit margins. What would Mako's ROA have been if the inventory turnover had been 8 for the year?

Suppose Mako's managers believe the annual inventory turnover can be raised to 8 times without affecting sale or profit margins. What would Mako's ROA have been if the inventory turnover had been 8 for the year?

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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Concept explainers

Conversion Cycle

Conversion cycle is also known as cash cycle or net operating cycle. Conversion cycle refers to how much time a company takes to turn its investments which is done from stock or any other financial resources into cash flows from sales.

Question

Mako Industries is considering changes in its working capital policies to improve
its cash flow cycle. Mako's sales last year were $6.0 million (all on credit), and its
net profit margin was 8%. Its inventory turnover was 7.0 times during the year,
and its DSO was 45 days. Its annual cost of goods sold was $4.20 million. The
firm had fixed assets totaling $600,000. Mako's payables deferral period is 30
days.
Suppose Mako's managers believe the annual inventory turnover can be raised
to 8 times without affecting sale or profit margins. What would Mako's ROA
have been if the inventory turnover had been 8 for the year?
O 25.74%
O 21.03%
O 24.33%
O 26.57%

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