Fundamentals of Financial Management, Third Edition

SOLVED NUMERICAL PROBLEMS

1. Calculate cash conversion period from the financial variables given hereunder:
   

   Solution

   Inventory conversion period:

           {(940 + 936)/2 / (7,036/365) = 48.7 days

   B/R conversion period:

           {(942 + 962)/2}/(7,936/365) = 43.8 days

   Payables conversion period:

           {(608+606)/2}/(7,036/365) = 31.5 days

   Cash conversion period:

           48.7 + 43.8 − 31.5 = 61 days

    

2. Find the average conversion period with the help of the following data:

   Gross operating cycle	= 88 days
   Net operating cycle	= 65 days
   Raw material storage period	= 45 days
   Work-in-progress conversion period	= 4 days
   Finished goods ...