The Christie Corporation is trying to determine the effect of its inventory turnover ratio and days sales outstanding(DSO) on its cash flow cycle. Christie's sales last year(on all credit)were...

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The Christie Corporation is trying to determine the effect of its inventory turnover ratio and days sales outstanding(DSO) on its cash flow cycle.
Christie's sales last year(on all credit)were $150,000,and it earned a net profit of 6%, or$9,000. It turned over its inventory
7.5 times during the year,and its DSO was 36.5 days.Its annual cost of goods sold was $121,667.The firm had assets
totalling $35,000. Christie's payables deferral period is 40days.
Calculate Christie's cash conversion cycle.
Assuming Christie holds negligible amounts of cash and marketable securities,calculate its total assets turnover and ROA.
Suppose Christie's managers believe the annual inventory turnover can be raised to 9 times without affecting sales.
What would Christie's cash conversion cycle,total assets turnover,and ROA have been if inventory had been 9 for the year?


Answered Same DayDec 22, 2021

Answer To: The Christie Corporation is trying to determine the effect of its inventory turnover ratio and days...

David answered on Dec 22 2021
127 Votes
a. Inventory conversion period = 365/Inventory Turnover Ratio
= 365/7.5 = 48.67 days.
Receivables collection period = DSO = 36.5 days.
Cash Conversion Cycle = Inventory Conversion Period + Receivables Collection Period –
Payables Deferral Period
...
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