In: Finance

# The Greek Connection had sales of $29.9 million and a cost of goods sold of... The Greek Connection had sales of$ 29.9

million and a cost of goods sold of

$12.0 million in 2013. A simplified balance sheet for the firm appears? below: a. Calculate The Greek? Connection's net working capital in 2013. b. Calculate the cash conversion cycle of The Greek Connection in 2013. c. The industry average accounts receivable days is 30 days. What would have been the cash conversion cycle for The Greek Connection in 2013 had it met the industry average for accounts receivable? days? (Hint: Use a ? 365-day year.)  THE GREEK CONNECTION BALANCE SHEET as of December? 31, 2013 ?(thousands of? dollars)  Assets Liabilities and Equity Cash ?$1,557 Accounts payable ?$1,496 Accounts receivable 4,301 Notes payable 1,000 Inventory 1,122 Accruals 1,220 Total current assets ?$6,980 Total current liabilities ?$3,716 Net? plant, property, and equipment ?$8,500 ?Long-term debt ?$3,000 Total assets ?$15,480 Total liabilities ?$6,716 Common equity ?$8,764 Total liabilities and equity ?$15,480 ## Solutions ##### Expert Solution Answer a. Net Working Capital = Current Assets - Current Liabilities Net Working Capital =$6,980 - $3,716 Net Working Capital =$3,264

Days Inventory Outstanding = 365 * Inventory / Cost of Goods Sold
Days Inventory Outstanding = 365 * $1,122 /$12,000
Days Inventory Outstanding = 34.1 days

Days Sales Outstanding = 365 * Accounts Receivable / Sales
Days Sales Outstanding = 365 * $4,301 /$29,900
Days Sales Outstanding = 52.5 days

Days Payable Outstanding = 365 * Accounts Payable / Cost of Goods Sold
Days Payable Outstanding = 365 * $1,496 /$12,000
Days Payable Outstanding = 45.5 days

Cash Conversion Cycle = Days Inventory Outstanding + Days Sales Outstanding - Days Payable Outstanding
Cash Conversion Cycle = 34.1 days + 52.5 days - 45.5 days
Cash Conversion Cycle = 41.1 days

Cash Conversion Cycle = Days Inventory Outstanding + Days Sales Outstanding - Days Payable Outstanding
Cash Conversion Cycle = 34.1 days + 30.0 days - 45.5 days
Cash Conversion Cycle = 18.6 days

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