The Christie Corporation is trying to determine the effect of its inventory turnover ratio and days sales outstanding (DSO) on its cash

# The Christie Corporation is trying to determine the effect of its inventory turnover ratio and days sales outstanding (DSO) on its cash

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The Christie Corporation is trying to determine the effect of its inventory turnover ratio and days sales outstanding (DSO) on its cash flow cycle. Christie's sales last year (all on credit) were 150,000, and it earned a net profit of 6%, or 9,000. It turned over its inventory 7.5 times during the year, and its DSO was 36.5 days. Its annual cost of goods sold was 121,667. The firm had fixed assets totaling 35,000. Christie's payables deferral period is 40 days.

Question a: Calculate Christie's cash conversion cycle.

Solution a: Cash Conversion Cycle (CCC) DIODSO-DPO

Where: DIO represents days inventory outstanding,DSO represents days sales outstanding,DPO represents days payable outstanding

DIO 365/7.5 days

DSO 36.5 days

DPO 40 days

CCC days

...

The Christie
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Excerpt from file: The Christie Corporation is trying to determine the effect of its inventory turnover ratio and days sales outstanding (DSO) on its cash flow cycle. Christies sales last year (all on credit) were 150,000, and it earned a net profit of 6%, or 9,000. It turned over its inventory 7.5 times during the

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