Your consulting firm was lately hired to enhance the performance of Shin-Soenen Inc, which is highly profitable however has been experiencing cash shortages due to its high growth rate. As one part of your analysis, you wish for to find out the firm's cash conversion cycle. By using the given information and a 365-day year, determine the firm's present cash conversion cycle?
Average inventory = $75,000
Annual sales = $600,000
Annual cost of goods sold = $360,000
Average accounts receivable = $160,000
Average accounts payable = $25,000
a. 120.6 days
b. 126.9 days
c. 133.6 days
d. 140.6 days
e. 148.0 days
Avg. inventory = $75,000 Annual sales = $600,000
Avg. receivables = $160,000 Annual COGS = $360,000
Avg. payables = $25,000 Days in year = 365
Inv. conv. / (COGS/365) 76.0
+ /(Sales/365) 97.3
- Payables /(COGS/365) -25.3
Cash conversion cycle (CCC) 148.0