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28 Sep 2019
Cash conversion cycle American Products is concerned aboutmanaging cash efficiently. On the average, inventories have an ageof 90 days, and accounts receivable are collected in 60 days.Accounts payable are paid approximately 30 days after they arise.The firm has annual sales of about $30 million. Assume there is nodifference in the investment per dollar of sales in inventory,receivables, and payables; and, a 365-day year.
a. Calculate the firmâs operating cycle.
b. Calculate the firmâs cash conversion cycle.
c. Calculate the amount of resources needed to support the firmâscash conversion cycle.
d. Discuss how management might be able to reduce the cashconversion cycle (be brief).
Cash conversion cycle American Products is concerned aboutmanaging cash efficiently. On the average, inventories have an ageof 90 days, and accounts receivable are collected in 60 days.Accounts payable are paid approximately 30 days after they arise.The firm has annual sales of about $30 million. Assume there is nodifference in the investment per dollar of sales in inventory,receivables, and payables; and, a 365-day year.
a. Calculate the firmâs operating cycle.
b. Calculate the firmâs cash conversion cycle.
c. Calculate the amount of resources needed to support the firmâscash conversion cycle.
d. Discuss how management might be able to reduce the cashconversion cycle (be brief).
Tod ThielLv2
29 Sep 2019
