Calculation of Cash Conversion Cyles for Dollar Tree and Walmart

Question

Go to finance.yahoo.com and collect data for Dollar Tree Inc. (DLTR) and Wal-Mart (WMT) to calculate their cash conversion cycles.  

You can enter the ticker symbol (DLTR for example) in the “quote lookup” box toward the right side to search for each firm individually.  Once the company comes up, you can click on the “financials” tab. The income statement will pop up and you can click on the balance sheet button to access that financial statement.  Use the current year’s annual data to find:  Sales (Revenue), Cost of Revenue (Cost of Goods Sold), Inventory, Accounts Receivable, and Accounts Payable.

a.Calculate the cash conversion cycle for both firms.

b.Which store has the better cash conversion cycle?

c. What impact would it have on the cash conversion cycle if Wal-Mart decided to offer an in-store credit card and customers on average took 30 days to pay?

Answer

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