BU283 Chapter Notes - Chapter 15: Cash Conversion Cycle, Accounts Payable
Document Summary
Bu283 chapter 15: the management of working capital. Operating period: inventory period + receivables cycle; amount of time required to acquire, sell, and receive payment on a company"s merchandise. Cash conversion cycle: time between when we pay for our products and when we receive payment for selling them. Problem each firm faces is timing of cash inflows isn"t synced with cash outflows. Inventory period: length of time it takes to acquire, process, and sell the inventory (e. g. building product, holding it on shelf) Collection period: length of time from the sale of the product until payment is received. Operation period = inventory period + collection period. Account payables period: amount of time the vendor gives a company to pay for its purchases of inventory. Cash conversion cycle = operating period account payable period. 1. 3 how to calculate the cash conversion cycle. Operating period: operation period = inventory period + collection period. Cash conversion cycle = operating period accounts payable period.
