The Butler-Huron Company's balance sheet and income statement for last year are as follows:
*Assume that all sales are credit sales and that average accounts receivable are the same as ending accounts receivable.
**Assume that average inventory over the year was the same as ending inventory.
***Assume that average accounts payable are the same as ending accounts payable.
Income Statement (in Millions of Dollars)
Net sales ................. $13,644
Cost of sales ............... 9,890
Selling, general, and administrative expenses .. 2,264
Other expenses .............. 812
Total expenses .............. $12,966
Earnings before taxes ............ 678
Taxes .................... 268
Earnings after taxes (net income) ........ $410
a. Determine Butler-Huron's cash conversion cycle.
b. Determine Butler-Huron's cash conversion cycle assuming that 75 percent of annual sales are credit sales (i.e., 25 percent represent cash sales).
c. Determine Butler-Huron's cash conversion cycle assuming that 50 percent of annual sales are creditsales.