Solution
Content
Working Capital Management
1. The Boudreaux Corp. has an inventory conversion period of 75 days. A receivable collection period of 38 days, and a payables deferral period of 30 days. a. What is the length of the firm’s cash conversion cycle? b. If the firm’s annual sales are $3,375,000 and all sales are on credit, what is the firm’s investment in accounts receivable? c. How many times per year does Boudreaux turn over its inventory? 1) a)CCC = 75 + 38 – 30 = 83 days b) Average sales per day = $3,375,000/360 = $9,375 Investment in receivables = $9,375 x 38 = $356,250 c) Inventory turnover = 360/75 = 4.8 times
1. The Boudreaux Corp. has an inventory conversion period of 75 days. A receivable collection period of 38 days, and a payables deferral period of 30 days. a. What is the length of the firm’s cash conversion cycle? b. If the firm’s annual sales are $3,375,000 and all sales are on credit, what is the firm’s investment in accounts receivable? c. How many times per year does Boudreaux turn over its inventory? 1) a)CCC = 75 + 38 – 30 = 83 days b) Average sales per day = $3,375,000/360 = $9,375 Investment in receivables = $9,375 x 38 = $356,250 c) Inventory turnover = 360/75 = 4.8 times
