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Strickler technology is considering changes in its working capital policies to improve its cash flow cycle. Strickler's sales last year were $3,250,000 (all on credit), and its net profit margin was 7%. Its inventory turnover was 9.0 times during the year, and its DSO was 41 days. Its annual cost of goods sold was $1,895,000. The firm has fixed assets totaling $535,000. Strickler's payables deferral period is 45 days.

a) find out Strickler's cash conversion cycle.

b) Assuming Strickler holds negligible amounts of cash and marketable securities, find out its total assets turnover and ROA.

c) Suppose Strickler's managers believe the annual inventory turnover can be raised to 12 times without affecting sales. What would Strickler's cash conversion cycle, total assets turnover, and ROA have been if the inventory turnover had been 12 for the year?

 

Basic Finance, Finance

  • Category:- Basic Finance
  • Reference No.:- M925092

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