Working capital policies to improve its cash flow cycle

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Reference no: EM133638025

Question

Strickler Technology is considering changes in its working capital policies to improve its cash flow cycle. Strickler's sales last year were $2,160,000 (all on credit), and its net profit margin was 8%. Its inventory turnover was 6.0 times during the year, and its DSO was 30 days. Its annual cost of goods sold was $1,200,000. The firm had fixed assets totaling $360,000. Strickler's payables deferral period is 33 days. Assume a 365-day year.

A. Calculate Strickler's cash conversion cycle. Do not round intermediate calculations.

____ Days

B. Assuming Strickler holds negligible amounts of cash and marketable securities, calculate its total assets turnover and ROA. Do not round intermediate calculations.

Total Assets Turnover: ____ Times

ROA: ____ %

C. Suppose Strickler's managers believe the annual inventory turnover can be raised to 10 times without affecting sale or profit margins. What would Strickler's cash conversion cycle, total assets turnover, and ROA have been if the inventory turnover had been 10 for the year? Do not round intermediate calculations.

Cash Conversion Cycle: ____ Days

Total Assets Turnover: ____ Times

ROA: ____%

Reference no: EM133638025

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