For 2019, perform an analysis of productivity based on the following working capital components: Accounts Receivable (AR), Inventory, and Accounts Payable (AP). Calculate their turnover, and the corresponding Days Sales Outstanding (DSO), Days Inventory Outstanding (DIO), and Days Payable Outstanding (DPO). Calculate the cash conversion cycle (CCC). Provide all the calculations.

- DSO = [tex] \frac{365}{\text{Net Sales}} \times \text{Average Accounts Receivable} = 31.8 \text{ days} [/tex]
- DIO = [tex] \frac{365}{\left( \frac{\text{Cost of Goods Sold}}{\text{Average Inventories}} \right)} = 141.6 \text{ days} [/tex]
- DPO = [tex] \frac{365}{\left( \frac{\text{Cost of Goods Sold}}{\text{Average Accounts Payable}} \right)} = 100.8 \text{ days} [/tex]
- CCC = DSO + DIO - DPO = 72.6 days

Based on the calculations above, provide your comments regarding SBD’s productivity. How well is SBD managing this productivity component of Return on Equity (ROE)? Is SBD’s CCC appropriate with respect to its competitors, such as Snap-On? How does it compare with its industry?

SBD's CCC of 72.6 days suggests relatively effective management of its working capital components. Evaluating SBD's performance in relation to its industry can help identify areas for improvement and potential opportunities for increased efficiency in managing working capital.

The calculations provide insights into SBD's productivity in managing its working capital components. SBD has a DSO of 31.8 days, indicating that it takes approximately 31.8 days for the company to collect payments from its customers. This suggests that SBD is efficient in managing its receivables and converting sales into cash.

The DIO of 141.6 days suggests that it takes SBD approximately 141.6 days to sell its inventory. A higher DIO indicates a longer inventory holding period, which may lead to increased carrying costs and potential obsolescence risks. SBD should focus on optimizing inventory management to reduce the holding period and improve efficiency.

The DPO of 100.8 days indicates that, on average, it takes SBD approximately 100.8 days to pay its suppliers. A longer DPO implies that the company takes more time to settle its payables, which can positively impact cash flow by extending the payment period and providing additional working capital.

The Cash Conversion Cycle (CCC) of 72.6 days represents the time it takes for SBD to convert its resources into cash. A shorter CCC indicates more efficient management of working capital, as it reflects the time between cash outflows for inventory and cash inflows from sales.

To assess SBD's productivity component of Return on Equity (ROE), further analysis is required by considering other financial metrics and comparing them with industry benchmarks and competitors, such as Snap-On. Comparing SBD's CCC with its competitors and industry standards can provide insights into how well the company is performing in converting resources into cash compared to peers.

Learn more about Cash Conversion Cycle (CCC) here:

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