Working Capital Cash Flow Cycle
capital policies to improve its cash flow cycle. Strickler’s sales last year
were $3,250,000 (all on credit), and its net profit margin was 7%. Its
inventory turnover was 9.0 times during the year, and its DSO was 41 days. Its
annual cost of goods sold was $1,895,000. The firm has fixed assets totaling
$535,000. Strickler’s payables deferral period is 45 days.
a) Calculate
Strickler’s cash conversion cycle.
b) Assuming
Strickler holds negligible amounts of cash and marketable securities, calculate
its total assets turnover and ROA.
c) Suppose
Strickler’s managers believe the annual inventory turnover can be raised to 12
times without affecting sales. What would Strickler’s cash conversion cycle,
total assets turnover, and ROA have been if the inventory turnover had been 12
for the year?





