In: Finance
2. In the table below is information for two companies:
$000) |
Company K |
Company L |
Net sales(revenues |
21,472 |
23,314 |
Cost of goods sold |
13,050 |
5,192 |
Average inventory |
350 |
457 |
Average accounts receivable |
1,837 |
4,996 |
Average accounts payable |
2,025 |
1,048 |
Turnover days |
||
Days inventory outstanding |
37 |
32 |
Days sales outstanding |
31 |
78 |
Days payable outstanding |
61 |
75 |
Total assets |
12,500 |
12,000 |
Cash conversion cycle |
From the above data, make the observations about the relative performance and determine better-performed company. (Remember that the shorter the number of days in this cycle, more the amount of available cash, and less need to borrow).