Management and Organizational Studies 2310A/B Chapter 19: CHAPTER RECAP

• School: Western University
• Department: Management and Organizational Studies
• Course: Management and Organizational Studies 2310A/B
• Professor: Danny Morrison

Document Summary

The main components of net working capital are cash, inventory, receivables and payables. Operating cycle: the average length of time between when a firm originally received it"s inventory and when it receives the cash back from sellings it"s product. Cash cycle: the length of time between when a firm pays cash to purchase it"s initial inventory and when it receives cash from the sale of the output produced from that inventory. Cash conversion cycle (ccc): a measure of the cash cycle calculated as the sum of a firm"s inventory days and accounts receivable days, less it"s accounts payable days. Inventory days = inventory / avg daily cogs. : the difference between receivables and payables that is the net amount of a firm"s capital consumed as a result of those credit transactions; the credit that a firm extends to it"s customers. Cash discount: the percentage discount offered on a payment if the buyer pays early.