Alpha Company Would Like to Estimate How Long It Will

question 44

Essay

Alpha Company would like to estimate how long it will take to realize cash from its ending inventory.For this purpose the following data are submitted:
$\begin{array}{c}\begin{array}{lll} \text {Accounts Receivable, less allowance for doubtful accounts of \( \$ 40,000 \) }\\ \text {Ending Inventory}\\ \text {Net Sales}\\\text { Cost of Goode Sold }\end{array}\begin{array}{lll}\$660,000\\750,00\\5,650,000\\4,250,000\end{array}\end{array}$

$\text { Days' Sales in Inventory } = \frac { \text { Ending Inventory } } { \text { Cost of Goods Sold } / 365 }$
$\text { Days' Sales in Receivables } = \frac { \text { Gross Receivables } } { \text { Net Sales } / 365 }$
Required:
Estimate how long it will take to realize cash from the ending inventory.

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Definitions:

September

The ninth month of the year in the Gregorian calendar.

Positive Net Present Value

An indicator that an investment is expected to generate more cash than the initial amount invested, viewed positively in capital budgeting.

Regular Dividend

A fixed amount paid by a company to its shareholders out of its profits (or reserves) on a regular schedule.

Dividend Policy

A company's approach to distributing profits back to its shareholders in the form of dividends.