Calculate David cash conversion cycle

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Question - David's company is considering changes in its working capital policies to improve its cash flow cycle. David's sales last year were $5,500,000 (all on credit), and its net profit margin was 6.5%. Its inventory turnover was 4.5 times during the year, and its DSO was 33 days. Its annual cost of goods sold was $3,200,000. The firm had fixed assets totaling $675,000. Dubner's payables deferral period is 45 days.

Required -

a. Calculate David's cash conversion cycle.

b. Assuming David holds negligible amounts of cash and marketable securities, calculate its total assets turnover and ROA.

c. Suppose David's managers believe the annual inventory turnover can be raised to 6 times without affecting sales. What would Merton's cash conversion cycle, total assets turnover, and ROA have been if the inventory turnover had been 6 for the year?

Reference no: EM132796231

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