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    The Greek Connection: Net Working Capital and Cash Conversion

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    The Greek Connection had sales of $29.2 million and a cost of goods sold of $11.7 million in 2015. A simplified balance sheet for the firm appears below:

    Balance Sheet as of December​ 31, 2015​ (thousands of​ dollars)

    Cash $1,947
    Accounts receivable 4,207
    Inventory 1,110
    Total current assets $7,264
    Net plant, property, and equipment 8,500
    Total asset $15,764

    Liabilities and Equity
    Accounts payable 1,404
    Notes payable 1,000
    Accruals 1,220
    Total current liabilities 3,624
    ​Long-term debt 3,000
    Total liabilities 6,624
    Common equity 9,140
    Total liabilities and equity $15,764

    a. Calculate The Greek​ Connection's net working capital in 2015. The net working capital is ​$
    b. Calculate the cash conversion cycle of The Greek Connection in 2015.
    c. The industry average accounts receivable days is 30 days. What would the cash conversion cycle for The Greek Connection have been in 2015 had it matched the industry average for accounts receivable​ days? (Round to the nearest​ dollar.)

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    Solution Summary

    This solution illustrates how to compute a company's net working capital as well its days sales in inventory, days sales outstanding, days sales in accounts payable, accounts receivable turnover, inventory turnover, and accounts payable turnover.