   Chapter 16, Problem 4P Fundamentals of Financial Manageme...

15th Edition
Eugene F. Brigham + 1 other
ISBN: 9781337395250

Solutions

Chapter
Section Fundamentals of Financial Manageme...

15th Edition
Eugene F. Brigham + 1 other
ISBN: 9781337395250
Textbook Problem

CASH CONVERSION CYCLE Zane Corporation has an inventory conversion period of 64 days, an average collection period of 28 days, and a payables deferral period of 41 days. a. What is the length of the cash conversion cycle? b. If Zane’s annual sales are \$2,578,235 and all sales are on credit, what is the investment in accounts receivable? c. How many times per year does Zane turn over its inventory? Assume that the cost of goods sold is 75% of sates. Use sales in the numerator to calculate the turnover ratio.

a.

Summary Introduction

To determine: The length of the cash conversion cycle.

Introduction:

Cash Conversion Cycle:

The cash conversion cycle refers to the time period which starts from the production of the products to selling of the products and until the time the customer receives the cash is known as the cash conversion cycle.

Explanation

Given information:

The inventory conversion period is 64 days.

The average collection period is 28 days.

The payables deferral period is 41 days.

Calculation of the length of the cash conversion cycle:

The formula to calculate the length of the cash conversion cycle is,

CashConversionCycle=Inventoryconversionperiod+Averagecollectionperiod<

b.

Summary Introduction

To determine: The investment in accounts receivable.

c.

Summary Introduction

To determine: The inventory turnover ratio.

Still sussing out bartleby?

Check out a sample textbook solution.

See a sample solution

The Solution to Your Study Problems

Bartleby provides explanations to thousands of textbook problems written by our experts, many with advanced degrees!

Get Started

How is the grapevine used in a business organization?

Foundations of Business (MindTap Course List)

List and describe four determinants of a countrys productivity.

Principles of Macroeconomics (MindTap Course List)

In what ways is economics a science?

Principles of Microeconomics (MindTap Course List)

Financial statements are based on generally accepted accounting principles (GAAP) and are audited by CPA firms....

Fundamentals of Financial Management, Concise Edition (with Thomson ONE - Business School Edition, 1 term (6 months) Printed Access Card) (MindTap Course List)

List and describe six costs of inflation.

Principles of Macroeconomics (MindTap Course List) 