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N 431 - Assignment 08 - Topic 07: Working Capital Management (Ch 21, 22, and 23) Red Pencil Office Supplies is a mature firm that has a stable flow of business. The following data was taken from its financial statements last year: Red Pencil's CFo is interested in determining the length of time funds are tied up in working capital. Use the information in the preceding table to answer the following questions. (Note: Use 365 days as the length of a year in all calculations, and round all values to two decimal places.) What is the value of the inventory conversion period? 41.06 days 53.90 days 43.63 days 159.60 days Both the inventory conversion period and payables deferral period use the average daily cogs in their denominators, whereas the average collection period uses average daily sales in its denominator. Why do these measures use different inputs? Current assets should be divided by sales, but current liabilities should be divided by the cOGS. Inventory and accounts payable are carried at cost on the balance sheet, whereas accounts recelvable are recorded at the price at which goods are sold. What is the average collection period? 84.53 days 36.81 days 30.11 days 28.44 days Both the inventory conversion period and payables deferral period use the average dally COGS in their denominators, whereas the average collection period uses average daily sales in its denominator. Why do these measures use different inputs? Current assets should be divided by sales, but current liabilities should be divided by the COGS. Inventory and accounts payable are carried at cost on the balance sheet, whereas accounts recelvable are recorded at the price at which goods are sold. What is the average collection period? 84,53 days 36.81 days 30.11 days 28.44 days What is the payables deferral period? 52.47 days 141.86 days 43.35 days 41.07 days What is the cash conversion cycle? 37.20 days 41.12 days 102.27 days 46.99 days

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