A Firm Has Days' Sales in Inventory of 105 Days,an

question 41

Essay

A firm has days' sales in inventory of 105 days,an average collection period of 35 days,and takes 42 days,on average,to pay its accounts payable. Taken together,what do these three figures imply about the firm's operations and its cash flows?

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Definitions:

Shareholders' Equity

The residual interest in the assets of an entity after deducting liabilities, representing the owners' claim on the company's assets.

Goodwill

An intangible asset that arises when a business is acquired for more than the fair value of its net identifiable assets.

Consolidated Financial Statements

These statements combine the financial information of a parent company and its subsidiaries, presenting the financial performance and position as if they were a single entity.

Impairment

The decrease in the recoverable value of an asset below its carrying amount, leading to a write-down value in the balance sheet.