Choon Lee Furniture has $600,000 in inventory and $300,000 in accounts receivable. Its average daily sales...

 

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Choon Lee Furniture has $600,000 in inventory and $300,000 in accounts receivable. Its average daily sales are $10,000 and sales represent 80% of cost of goods sold. The company's payables deferral period (accounts payable divided by daily purchases) is 30 days. Purchases represent about 70% of cost of goods sold. [Use 365 days per year] a) What is the length of the company's cash conversion cycle (CCC)? (6 marks) b) Based on the current sales level and the CCC obtained, what is the company's working capital requirement? (2 marks) c) Assuming CCC remains constant and sales increase by 15%, what would the company's expected working capital requirement be? (2 marks) [Total: 10 marks] Choon Lee Furniture has $600,000 in inventory and $300,000 in accounts receivable. Its average daily sales are $10,000 and sales represent 80% of cost of goods sold. The company's payables deferral period (accounts payable divided by daily purchases) is 30 days. Purchases represent about 70% of cost of goods sold. [Use 365 days per year] a) What is the length of the company's cash conversion cycle (CCC)? (6 marks) b) Based on the current sales level and the CCC obtained, what is the company's working capital requirement? (2 marks) c) Assuming CCC remains constant and sales increase by 15%, what would the company's expected working capital requirement be? (2 marks) [Total: 10 marks]

Answer rating: 100% (QA)

a Inventory conversion period ICP Inventory Cost of Goods Sold 365 ICP 600000 08 10000 365 2055 days ... View the full answer