Safety-First, Inc., makes portable ladders that can be used to exit second-floor levels of homes in the event of fire. Each ladder consists of fire resistant rope and high-strength plastic steps. A lightweight fire-resistant cape with a smoke filter is included with the Safety-First ladder. Each ladder and cape, when not in use, is rolled up and stored in a pouch the size of a backpack and can easily be taken on trips and vacations.
Jan Smithson founded Safety-First after graduating from a private liberal arts college in the Northwest three years ago. After struggling for the first year, the venture seemed to be growing and producing profits. Following are the two most recent years of financial statements, expressed in thousands of dollars, for Safety-First, Inc.
A. Using year-end data, calculate the inventory-to-sale conversion period, the saleto- cash conversion period, and the purchase-to-payment conversion period for 2007 and 2008.
B. Determine the cash conversion cycle for each year and discuss the changes that took place, ifany.