Cash Conversion cycle Based On Balance Sheet
Gates Industries balance sheet and income statement for the year ending December 31, 1978 are as follows:
|
Balance Sheet ($million)
|
|
Cash
|
$ 10.0
|
Accounts payable
|
$ 15.0
|
|
Accounts receivable
|
15.0
|
Salaries, benefits, & payroll taxes payable
|
3.0
|
|
Inventories*
|
12.0
|
Long-term debt
|
15.0
|
|
Fixed assets (net)
|
30.0
|
Stockholder' equity
|
34.0
|
|
Total Assets
|
$ 67.0
|
Total liabilities & stock equity
|
67.0
|
|
Income Statement ($million)
|
|
Net sales (all credit)
|
$ 125.0
|
|
Cost of sales
|
75.0
|
|
Selling, general, & administration expenses
|
30.0
|
|
Other expenses
|
13.0
|
|
Earnings after tax
|
7.0
|
|
|
|
|
*Note: Average inventories also equal $12.0 (million)
Determine the length of the firm's cash conversion cycle.