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 inventoryturnover 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 30days.Suppose Mako's managers believe the annual inventory turnover can be raised to 9 tímes withoutaffecting sale or profit margins. What would Mako's ROA have been if the inventory turnover hadbeen 8 for the year?25.13%O 26.57%O 24.33%O 21.03%

Introduction: The term return on assets can be defined as the returns which a company can generate…

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What would Mako's ROA have been if the inventory turnover had

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

Inventory Accounting

Inventory accounting is that branch of accounting that helps in determining the specific value of assets at different stages of production and development.

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 9 tímes without
affecting sale or profit margins. What would Mako's ROA have been if the inventory turnover had
been 8 for the year?
25.13%
O 26.57%
O 24.33%
O 21.03%

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