Your Consulting Firm Was Recently Hired to Improve the Performance

question 55

Multiple Choice

Your consulting firm was recently hired to improve the performance of Shin-Soenen Inc,which is 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? Do not round intermediate calculations. $$\begin{array} { l r } \text { Average inventory } = & \$ 75,000 \\\text { Annual sales } = & \$ 775,000 \\\text { Annual cost of goods sold } = & \$ 465,000 \\\text { Average accounts receivable } = & \$ 160,000 \\\text { Average accounts payable } = & \$ 25,000\end{array}$$
?

• A) 128.4 days
• B) 121.5 days
• C) 87.1 days
• D) 114.6 days
• E) 88.2 days

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Definitions:

Most Efficient Output

The level of production at which a firm or economy can produce goods at the lowest average cost, maximizing efficiency.

Profit-Maximizing

The process by which a company determines the price and output level that returns the highest profit.

Loss-Minimizing

A strategy or position where a firm aims to reduce its losses to the lowest possible level under adverse conditions, often by adjusting production.

Zero Economic Profits

Zero economic profits occur in a competitive equilibrium when firms earn just enough revenue to cover their total costs, including the opportunity costs.