a. The Flamingo Corporation is trying to determine the effect of its inventory turnover ratio and days sales outstanding on its cash flow cycle. Last year, the company’s sales (all on credit) were $180,000 and it COGS were 85% of the sales. Inventory was turned around 8 times during the year and accounts receivable turnover was 10. Flamingo’s payables deferral period was 30 days. Calculate CCC. Compute the average balances in accounts receivables, accounts payable and inventory.
b. Interpret and analyze the CCC for this company. Why is CCC important?