Question: Problem Set: Managing and Financing Current Assets Question 1 Spartan Sporting Goods has $5 million in inventory and $2 million in accounts receivable. Its average

Problem Set: Managing and Financing Current Assets

Question 1

Spartan Sporting Goods has $5 million in inventory and $2 million in accounts receivable. Its average daily sales are $100,000. The companys payables deferral period (accounts payable divided by daily purchases) is 30 days. What is the length of the companys cash conversion cycle?

Question 2

A firm is offered trade credit terms of 3/15, net 45 days. The firm does not take the discount, and it pays after 67 days. What is the nominal annual cost of not taking the discount? (Assume a 365-day year.)

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