Question

The following information is to be used for answering questions 24 to 30 inclusive

Cash 20,000

Accounts Receivable 40,000

Inventories 40,000

Current Assets 100,000

Accounts Payable 30,000

Accruals 10,000

Notes Payable 40,000

Current Liabilities 80,000

Sales 250,000

Cost of Goods Sold 170,000

The current ratio is 1.25

DSO is 58.4 days

DIH is 85.9 days

OC is 144.4 days

4. The company's days payable outstanding (DPO) is__?

6. The company's cash conversion cycle (CCCC) is__?

7. The company's working capital requirement is__?

Answer 1

Days Payable Outstanding =					Ending Accounts Payable/(Cost of sales/Number of days)
		Ending Accounts Payable		$    30,000.00
		Cost of sales		$ 170,000.00
				($ 30000/($ 170000/365))
			DPO=	64.41	Days
				64 days (Approx)
Cash Conversion Cycle =				DIO+DSO-DPO
			DIO	85.88 Days
			DSO	58.4 Days
			DPO	64.41 Days
		Calculation of DIO		(Inventory/(Cost of sales/365))
				(40000/(170000/365))
				85.88
		Calculation of CCC =		DIO+DSO-DPO
				(85.88+58.4-64.41)
				79.87	Days
Working Capital requirement =				Current Assets-Current Liabilities
				($ 100000-$ 80000)
				$    20,000.00
Answers
	4. The company's days payable outstanding (DPO) is 64 Days.
	6. The company's cash conversion cycle (CCCC) is 79.87 Days
	7. The company's working capital requirement is $ 20000.