Shulman Inc.has the following data,in thousands.Assuming a 365-day year,what is the firm's cash conversion cycle? $$\begin{array} { l l }
\text { Annual sales } = & \$ 45,000 \
\text { Annual cost of goods sold } = & \$ 30,000 \
\text { Inventory } = & \$ 4,500 \
\text { Accounts receivable } = & \$ 1,800 \
\text { Accounts payable } = & \$ 2,500
\end{array}$$

Question

Shulman Inc.has the following data,in thousands.Assuming a 365-day year,what is the firm's cash conversion cycle? $$\begin{array} { l l } 
\text { Annual sales } = & \$ 45,000 \
\text { Annual cost of goods sold } = & \$ 30,000 \
\text { Inventory } = & \$ 4,500 \
\text { Accounts receivable } = & \$ 1,800 \
\text { Accounts payable } = & \$ 2,500
\end{array}$$

Quizplus · Accepted Answer

The cash conversion cycle is calculated as follows:

Cash Conversion Cycle = Average inventory days + Average receivables days - Average payable days

Average inventory days = (Inventory / Cost of goods sold) x 365 = (4,500 / 30,000) x 365 = 54.75 days

Average receivables days = (Accounts receivable / Annual sales) x 365 = (1,800 / 45,000) x 365 = 14.6 days

Average payable days = (Accounts payable / Cost of goods sold) x 365 = (2,500 / 30,000) x 365 = 30.42 days

Cash Conversion Cycle = 54.75 days + 14.6 days - 30.42 days = 39.93 days ≈ 39 days

Therefore, the best choice is D) 39 days.

Shulman Inc A)28 Days B)32 Days C)35 Days D)39 Days E)43 Days

Shulman Inc A)28 Days
B)32 Days
C)35 Days
D)39 Days
E)43 Days