Question
In: Finance
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.
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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 1 year agoRelated Solutions
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