Marshall Inc.recently hired your consulting firm to improve the company's performance.It has been highly profitable but has been experiencing cash shortages due to its high growth rate.As one part of your analysis,you want to determine the firm's cash conversion cycle.Using the following information and a 365-day year,what is the firm's present cash conversion cycle? $$\begin{array} { l l }
\text { Average inventary } = & \$ 75,000 \
\text { Annual sales } = & \$ 600,000 \
\text { Annual cost af godis sold } = & \$ 360,000 \
\text { Average accounts receivable } = & \$ 160,000 \
\text { Average accounts payable } = & \$ 25,000
\end{array}$$

Question

Marshall Inc.recently hired your consulting firm to improve the company's performance.It has been highly profitable but has been experiencing cash shortages due to its high growth rate.As one part of your analysis,you want to determine the firm's cash conversion cycle.Using the following information and a 365-day year,what is the firm's present cash conversion cycle? $$\begin{array} { l l } 
\text { Average inventary } = & \$ 75,000 \
\text { Annual sales } = & \$ 600,000 \
\text { Annual cost af godis sold } = & \$ 360,000 \
\text { Average accounts receivable } = & \$ 160,000 \
\text { Average accounts payable } = & \$ 25,000
\end{array}$$

Quizplus · Accepted Answer

$$\begin{array} { l l l l } 
\text { Ave inventary } = & \text { \$7,000 } & \text { Annul sales } = & \text { \$600,000] } \
\text { Ave receivables } = & \text { \$160,000 } & \text { Annual COGS } = & \text { \$60,000 } \
\text { Ave peyables } = & \$ 25,000 & \text { Days in year } = & 365
\end{array}$$ $$\begin{array} { l r } 
\text { Inv. canv. perad } = \operatorname { lnv } / ( \mathrm { COGS } / 365 ) & 76.0 \
+ \text { DSO } = \text { Receivables/(Sales/365) } & 97.3 \
- \text { Peyables deferral } = \text { Payables/(COGS/365) } & - 25.3 \
\hline \text { Cash conversion cycle (CCC) } & \underline { 148.0 }
\end{array}$$

Marshall Inc A) 1206 Days B) 126

Marshall Inc A) 1206 Days
B) 126