Answer:
The Greek Connection
a. Net working capital in 2009 is:
= $3,530
b. Cash conversion cycle in 2009:
= 42 days
c. Cash conversion cycle if matched with industry average days sales outstanding:
= 27 days
Explanation:
Sales in 2009 = $32 million
Cost of goods sold in 2009 = $20 million
THE GREEK CONNECTION
Balance Sheet
As of December 31, 2009 (000)
Assets
Cash $2,000
Accounts receivable 3,950
Inventory 1,300
Total current assets $7,250
Net plant, property
, and equipment $8,500
Total Assets $15,750
Liabilities and Equity
Accounts payable $1,500
Notes payable 1,000
Accruals 1,220
Total current liabilities $3,720
Long-term debt $3,000
Total liabilities $6,720
Common equity 9,030
Total liabilities and equity $15,750
a. Net working capital in 2009:
Total current assets $7,250
Total current liabilities ($3,720)
Net working capital $3,530
b. Cash conversion cycle in 2009:
Accounts receivable days = Accounts receivable/Sales * 365
= $3,950/$32,000 * 365 = 45 days
Inventory days = $1,300/$20,000 * 365 = 24 days
Accounts payable days = $1,500/$20,000 * 365 = 27 days
Cash conversion cycle (days) = 42 days
c. Cash conversion cycle with industry average days sales outstanding:
Accounts receivable days = 30 days
Inventory days = 24 days
Accounts payable days = (27) days
Cash conversion cycle = 27 days
