Question

Ho to calculate receivable collection period, payables deferral period, and cash conversation period for P&G 2016, 2017, 2018.

http://financials.morningstar.com/income-statement/is.html?t=PG&region=usa&culture=en-US

http://financials.morningstar.com/balance-sheet/bs.html?t=PG&region=usa&culture=en-US

http://financials.morningstar.com/cash-flow/cf.html?t=PG&region=usa&culture=en-US

Answer 1

Cash Conversion Cycle = Inventory Conversion Period + Receivables Collection Period – Payables Deferral Period

Inventory Conversion Period = 365 / [Cost of Goods Sold / Average Inventory]

Inventory Conversion for 2018 = 365 / {34,268 / [(4,738 + 4,624)/2]}
=> 365 / [34,268 / 4,681] = 49.86

Inventory Conversion for 2017 = 365 / {32,535 / [(4,624 + 4,716)/2]}
=> 365 / [34,268 / 4,681] = 52.37

Inventory Conversion for 2016 = 32,909 / [(4,716 + 5,454)/2]
=> 365 / [34,268 / 4,681] = 56.41

Receivable Collection Period = 365 Days / [Net Sales / Average Account Receivables]

Receivable Collection Period for 2018 = 365 / {66,832 / [(4,686 + 4,594)/2]}
=> 365 / 14.40345 = 25.34 Days

Receivable Collection Period for 2017 = 365 / {65,058 / [(4,594 + 4,373)/2]}
=> 365 / 14.5105= 25.15 Days

Receivable Collection Period for 2016 = 365 / {65,299 / [(4,373 + 4,861)/2]}
=> 365 / 14.1432= 25.81 Days

Payables Deferral Period = 365 / [Net Sales/Average Accounts Payable]

Payables Deferral Period for 2018 = 365 / {66,832 / [(10,344 + 9,632)/2}
=> 365 / 6.6912 = 54.55

Payables Deferral Period for 2017 = 365 / {65,058 / [(9,632 + 9,325)/2}
=> 365 / 6.8637 = 53.18

Payables Deferral Period for 2016 = 365 / {65,299 / [(9,325 + 8,257)/2}
=> 365 / 7.4279 = 49.14

Cash Conversion Cycle for 2018 = 49.86 + 25.34 + 54.55 = 129.75

Cash Conversion Cycle for 2017 = 52.37 + 25.15 + 53.18 = 130.70

Cash Conversion Cycle for 2016 = 56.41 + 25.81 + 49.14 = 131.36