Problem 16-12 Working Capital Cash Flow Cycle Strickler Technology is considerin
ID: 2726977 • Letter: P
Question
Problem 16-12
Working Capital Cash Flow Cycle
Strickler Technology is considering changes in its working capital policies to improve its cash flow cycle. Strickler's sales last year were $190,000 (all on credit), and it earned a net profit of 6%. Its inventory turnover was 9.5 times during the year, and its DSO was 37.5 days. Its annual cost of goods sold was $121,122. The firm had fixed assets totaling $34,000. Strickler's payables deferral period is 45 days. Assume 365 days in year for your calculations. Do not round intermediate calculations.
Calculate Strickler's cash conversion cycle. Round your answer to two decimal places.
days
Suppose Strickler's managers believe that the inventory turnover can be raised to 9 times without affecting sales and cost of goods sold. What would Strickler's cash conversion cycle have been if the inventory turnover had been 9 for the year? Round your answer to two decimal places.
Explanation / Answer
Answer: Cash conversion cycle=DSO+DIO-DPO
=37.5 days+(365 days/9.5 times)-45 days
=30.92 days
Answer:
Cash conversion cycle=DSO+DIO-DPO
=37.5 days+(365 days/9 times)-45 days
=33.06 days