Balloon Payment Financial (BPF) has an inventory conversion period of 45 days, a receivables collection period of 30 days, and a payables deferral period of 15 days. (a) What is the length of the firm’s cash conversion cycle? (b) If BPF’s annual sales are $2.7 million and all sales are on credit, what is the average balance in accounts receivable? (c) How many times per year does BPF turn over its inventory?

Balloon Payment Financial (BPF) has an inventory conversion period of 45 days, a receivables collection period of 30 days, and a payables deferral period of 15 days. (a) What is the length of the firm’s cash conversion cycle? (b) If BPF’s annual sales are $2.7 million and all sales are on credit, what is the average balance in accounts receivable? (c) How many times per year does BPF turn over its inventory?

Corporate Fin Focused Approach

5th Edition

ISBN:9781285660516

Author:EHRHARDT

Publisher:EHRHARDT

Chapter16: Supply Chains And Working Capital Management

Section: Chapter Questions

Problem 11P

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QUESTION 1

From Chapter 14:

Balloon Payment Financial (BPF) has an inventory conversion period of 45 days, a receivables collection period of 30 days, and a payables deferral period of 15 days.

(a) What is the length of the firm’s cash conversion cycle?

(b) If BPF’s annual sales are $2.7 million and all sales are on credit, what is the average balance in accounts receivable?

(c) How many times per year does BPF turn over its inventory?

(d) What would happen to BPF’s cash conversion cycle if, on average, inventories could be turned over 12 times a year?

Definition Definition Money that the business will be receiving from its clients who have utilized the credit provided to buy its goods and services. The credit period typically lasts for a short term, lasting from a few days, a few months, to a year.

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