The short term financial position of Durable Plastic Goods factory comprises the following information: a. Accounts Payable: Tk.6000 b. Annual Credit sales: Tk.500000

The short term financial position of Durable Plastic Goods factory comprises the following information:

a. Accounts Payable: Tk.6000

b. Annual Credit sales: Tk.500000

c. Annual Credit purchase: Tk.350000

d. Receivables: Tk.50000

e. Inventory: Tk.80000

f. Cost of Goods Sold: Tk.400000

Draw the Cash Conversion Cycle in terms of days.

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Expert Solution

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

= 73 + 37 - 6

= 104 days

Days Inventory Outstanding = 365 / Stock inventory

= 365 / COGS * Average Stock

= 365 / 80,000 * 400,000 = 73 Days

Days Sales Outstanding = 365 / Credit Sales * Average Debtors

= 365 / 50,000 * 500,000

= 36.5 Days or 37 Days (approximately)

Days Payables Outstanding = 365 / Net Credit Purchases * Average Accounts Payable

= 365 / 6,000 * 350,000

= 6.25 Days or 6 Days (approximately)

Days Payables Outstanding = 6.25 Days or 6 Days (approximately)

Junaid answered 3 years ago

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