Homework Answers
The cash conversion cycle (CCC) measures the time between the cash outflow and the cash inflow of the company.
Cash conversion cycle = Days Inventory Outstanding + Days Sales Outstanding – Days Payable Outstanding
= {(Inventory / Cost of sale)) + (Account Receivables/Credit sales) - (Account Payable / Cost of sales)} * 365
= {(R 18,000/R 660,000) + (R 100,000/R 920,000) + (R 28,000/R 660,000)} *365
= {(0.02727 + 0.1087 + 0.04242)} *365
= 0.1784 * 365
= 65.11 days
The cash conversion cycle is 65.11 days. It indicates that how effectively a company manages its cash flow. Lower Cash conversion cycle is good for company
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Please answer letter C.
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Please answer letter C.
Cash conversion cycle American Products is concerned about managing cash efficiently. On the average, inventories have an age of 78 days, and accounts receivable are collected in 44 days. Accounts payable are paid approximately 32 days after they arise. The firm has annual sales of about $33 million. Cost of goods sold are $19 million, and purchases are $16 million. a. Calculate the firm's operating cycle b. Calculate the firm's cash conversion cycle. c. Calculate the...
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