Calculate the length of the inventory conversion period


Question: The Garcia Industries balance sheet & income statement for the year ended 2006 are as follows:

Balance sheet (in millions of dollars)

Assets                                                              Liabilities and Stockholders' Equity

Cash                $ 6.0                            Accounts Payable                                $10.0

Acc Receive       14.0                             Salaries, benefits and payroll               2.0

Inventories      12.0                             Other current liabilities                        10.0

Fixed assets     40.0                             Long term debt                                     12.0

                        $72.0                           Stockholders' equity                              38.0

                                                                                                                        $72.0

 The average inventory over the past two years also equals $12.0 million 

Income Statement (in millions of dollars) 

Net sales                                             $100.0

Cost of sales                                            60.0

Selling, gen/admin expenses                  20.0

Other expenses                                     15.0

Net income                                         $ 5.0 

[A] Calculate the length of the inventory conversion period

[B] Calculate the length of the receivables conversion period

[C] Calculate the length of operating cycle

[D] Calculate the length of the payables deferral period

[E] Calculate the length of the cash conversion cycle

[F] Find the meaning of the number calculated in (e)?

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Finance Basics: Calculate the length of the inventory conversion period
Reference No:- TGS020336

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