Chastain Corporation is trying to determine the effect of inventory turnover and average collection period on its cash conversion cycle. Chastain's 2018 sales (all on credit) were $121,000, its cost of sales is 80% of sales, and it had net income of 2%, or $2,420. Its inventories rotated 7 times during the year, and its average collection period was 37 days. The company had fixed assets of $42,000. The payment period to suppliers is 35 days. a) Calculate the cash conversion cycle of the company. b) Assuming that the company does not have significant levels of cash (it only has inventories and accounts receivable), calculate the total asset turnover.

Answer rating: 100% (QA)

To calculate the cash conversion cycle CCC we need to consider three factors inventory turnover average collection period and payment period to suppli... View the full answer