Exam 21: Working Capital Management

You have recently been hired to improve the performance of Multiplex Corporation, which has been experiencing a severe cash shortage. As one part of your analysis, you want to determine the firm's cash conversion cycle. Using the following information and a 365-day year, what is your estimate of the firm's current cash conversion cycle? • Current inventory = $120,000. • Annual sales = $600,000. • Accounts receivable = $157,808. • Accounts payable = $25,000. • Total annual purchases = $365,000. • Purchases credit terms: net 30 days. • Receivables credit terms: net 50 days.

Bowa Construction's days sales outstanding is 50 days (on a 365-day basis). The company's accounts receivable equal $100 million and its balance sheet shows inventory equal to $125 million. What is the company's inventory turnover ratio?