Estimation of the firm's present cash conversion cycle.
You were recently hired as CFO to improve the performance of Dennis Systems, which is highly profitable but has been experiencing cash shortages due to its high rate of growth. As one part of your analysis, you want to determine the firm's cash conversion cycle. Using the following information and a 365-day year, what is your estimate of the firm's present cash conversion cycle?
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Average inventory:
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$120,000
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Annual sales:
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$600,000
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Average accounts receivable:
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$160,000
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Average accounts payable:
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$25,000
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Total annual purchases:
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$365,000
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Buy on net 30 days, no discounts:
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30
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Sell on net 50 days, no discounts:
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50
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a) 118.4
b) 124.6
c) 131.2
d) 138.1
e) 145.3