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:

Average Total Cost

The total cost of production divided by the number of units produced, reflecting the cost per unit.

Competitive Price-searcher Firm

A company that sets its own prices based on its products, costs, and the competitive environment, rather than taking the market price as given.

Average Total Cost

The total cost of production divided by the quantity produced, indicating the average cost per unit.

Economic Profit

The difference between total revenue and the total opportunity costs of all resources used in production, including implicit and explicit costs.