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You have recently been hired to improve the performance of Multiplex Corporation, which has been experiencing a severe cash shortage. 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 your estimate of the firm's current cash conversion cycle? • Current inventory = $120,000.
• Annual sales = $600,000.
• Accounts receivable = $157,808.
• Accounts payable = $25,000.
• Total annual purchases = $365,000.
• Purchases credit terms: net 30 days.
• Receivables credit terms: net 50 days.
Return on Sales Ratio
A measure of a company's operational efficiency, calculated by dividing operating profit by net sales.
Return on Total Assets
A profitability ratio that measures the net income produced by total assets during a period by comparing net income to the average total assets.
Ratio
A relationship of two quantities or numbers, one divided by the other.
Trend Percentage
A financial analysis tool that shows how a set of financial or quantitative data changes over time, often expressed as a percentage.
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