Question: (Cash conversion cycle) The data for Sharmtraiding Company across the last 6 years have been provided:
Since Sharmtraiding saw an increase in sales, the management decided to hold more inventories. Assuming the cost of goods sold is 60 percent of sales.
a. Calculate the number of days of sales outstanding in receivables, days of sales in inventory, and days-payable outstanding for each year. What patterns do you note?
b. Evaluate the company's strategy in holding more inventories and its overall working capital management.