Nelson Corp. has $16.8 million of average inventory, $4.0 million of average trade receivables, $5.2 million...

Nelson Corp. has $16.8 million of average inventory, $4.0 million of average trade receivables, $5.2 million of average trade payables, an annual cost of sales of $26.5 million and annual sales of $48 million. What is the cash conversion cycle of this firm? Please round your final answer to the nearest integer.

Expert Solution

Average Inventory=	$ 16.8 million
Average Trade Receivables=	$ 4.0 million
Average Trade payables=	$ 5.2 millon
Annual Cost of Sales=	$ 26.5 million
Annual Sales=	$ 48 million

Cash Conversion Cycle=	Days Inventory Outstanding + Days Sales Outstanding - Days Payable Outstanding

Days Inventory Outstanding=	(Average Inventory / Cost of goods sold ) X 365
Days Inventory Outstanding=	($ 16.8 million / $ 26.5 million) X 365
Days Inventory Outstanding=	231.40 days

Days Sales Outstanding=	(Average Trade Receivables / Net Credit Sales) X 365
Days Sales Outstanding=	($ 4 million / $ 48 million) X 365
Days Sales Outstanding=	30.42 days

Days Payable Outstanding=	(Accounts Payable / Cost of goods Sold) X 365
Days Payable Outstanding=	$ 5.2 million / $ 26.5 million) X 365
Days Payable Outstanding=	71.62 days

Cash Conversion Cycle=	Days Inventory Outstanding + Days Sales Outstanding - Days Payable Outstanding
Cash Conversion Cycle=	231.40 days + 30.42 days+ 71.62 days
Cash Conversion Cycle=	333.44 days

Cash Conversion Cycle=	333 days

jeff jeffy answered 2 years ago

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