|The Christie Corporation is trying to determine the effect of its inventory turnover ratio and days sales outstanding(DSO) on its cash flow cycle.
|Christie’s sales last year(on all credit)were $150,000,and it earned a net profit of 6%, or$9,000. It turned over its inventory
|7.5 times during the year,and its DSO was 36.5 days.Its annual cost of goods sold was $121,667.The firm had assets
|totalling $35,000. Christie’s payables deferral period is 40days.
|Calculate Christie’s cash conversion cycle.
|Assuming Christie holds negligible amounts of cash and marketable securities,calculate its total assets turnover and ROA.
|Suppose Christie’s managers believe the annual inventory turnover can be raised to 9 times without affecting sales.
|What would Christie’s cash conversion cycle,total assets turnover,and ROA have been if inventory had been 9 for the year?
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