The Tamaraw Corporation is trying to determine the effect of its inventory turnover ratio and DSO on its cash flow cycle. Tamaraw’s 2022 sales (all on credit) were P180,000 and it earned a net profit of 5% or P9,000. The cost of goods sold equals 85% of sales. Inventory was turned over 8x during the year, and the average collection period was 36 days. The corporation has fixed assets totaling P40,00. Tamaraw’s payable deferral period is 30 days. Calculate Tamaraw’s cash conversion cycle. Suppose Tamaraw’s manager believes that inventory turnover can be raised to 10, what is the new cash conversion cycle?
The Tamaraw Corporation is trying to determine the effect of its inventory turnover ratio and DSO on its cash flow cycle. Tamaraw’s 2022 sales (all on credit) were P180,000 and it earned a net profit of 5% or P9,000. The cost of goods sold equals 85% of sales. Inventory was turned over 8x during the year, and the average collection period was 36 days. The corporation has fixed assets totaling P40,00. Tamaraw’s payable deferral period is 30 days. Calculate Tamaraw’s cash conversion cycle. Suppose Tamaraw’s manager believes that inventory turnover can be raised to 10, what is the new cash conversion cycle?
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 1P
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The Tamaraw Corporation is trying to determine the effect of its inventory turnover ratio and DSO on its cash flow cycle. Tamaraw’s 2022 sales (all on credit) were P180,000 and it earned a net profit of 5% or P9,000. The cost of goods sold equals 85% of sales. Inventory was turned over 8x during the year, and the average collection period was 36 days. The corporation has fixed assets totaling P40,00. Tamaraw’s payable deferral period is 30 days.
- Calculate Tamaraw’s cash conversion cycle.
- Suppose Tamaraw’s manager believes that inventory turnover can be raised to 10, what is the new cash conversion cycle?
Thank you so much!
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