Question
Last year the Tom Company had revenues = $400 million, COGS = $300 million, average A/R = $10 million, average inventories = $50 million, and
Last year the Tom Company had revenues = $400 million, COGS = $300 million, average A/R = $10 million, average inventories = $50 million, and average A/P = $5 million. Also assume that Tom is offered terms from its suppliers = 1/10 Net 40 and that the company can borrow from its local bank at an interest rate = 15%/year.
A) what is Tom's DIO (round to the nearest whole day)?
B) what is Tom's DSO (round to the nearest whole day)?
C) what is Tom's DPO (round to the nearest whole day)?
D) what is Tom's cash conversion cycle?
E) how long should Tom wait to pay its suppliers?
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Entrepreneurial Finance
Authors: J. Chris Leach, Ronald W. Melicher
6th edition
1305968352, 978-1337635653, 978-1305968356
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