Problem: The Latigo Company has the following financial information:
Sales $ 200
Cost of goods sold 100
Administrative expense 44
Depreciation 40
Interest expense 2
Tax 7
Net profit $ 7
Cash $ 5
Accounts receivable 20
Inventory 25
Fixed assets 60
Total $110
Accounts payable 5
Note payable 15
Long-term debt 20
Total Liab $40
Equity $ 70
Total Liab + Equity $110
Q1. The current assets to sales ratio for the industry is 0.20. State whether Latigo make more or less use of working capital than the industry.
Q2. Compute the working capital turnover for Latigo and for the industry.
Q3. Compute the operating cycle and the cash conversion cycle for Latigo.
Q4. The industry average cash conversion cycle is 112 days. Compare the industry to Latigo and identify any inferences that you can make.
Q5. Compute the cash flow for Latigo Company.