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Business operating cycle.  Kolman Kampers has a production cycle of 33 ​days, a collection cycle of...

Business operating cycle.  Kolman Kampers has a production cycle of 33 ​days, a collection cycle of 19 ​days, and a payment cycle of 12 days. What are​ Kolman's business operating cycle and cash conversion​ cycle? If Kolman reduces the production cycle by 1 ​days, what is the effect on the cash conversion​ cycle? If Kolman decreases the collection cycle by 1 ​days, what is the effect on the cash conversion​ cycle? If Kolman increases the payment cycle by 1 ​days, what is the effect on the cash conversion​ cycle?

Solutions

Expert Solution


What are​ Kolman's business operating cycle and cash conversion​ cycle?

Operating cycle = Production cycle + Collection cycle

Operating cycle = 33 days + 19 days = 52 days

.

Cash conversion cycle = Production cycle + Collection cycle - Payment cycle

Cash conversion cycle = 33 + 19 - 12 = 40 days

.

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If Kolman reduces the production cycle by 1 ​days, what is the effect on the cash conversion​ cycle?

Cash conversion cycle = (Production cycle-1) + Collection cycle - Payment cycle

Cash conversion cycle = (33-1) + 19 - 12 = 39 days

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If Kolman decreases the collection cycle by 1 ​days, what is the effect on the cash conversion​ cycle?

Cash conversion cycle = Production cycle + (Collection cycle-1) - Payment cycle

Cash conversion cycle = 33 + (19-1) - 12 = 39 days

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If Kolman increases the payment cycle by 1 ​days, what is the effect on the cash conversion​ cycle?

Cash conversion cycle = Production cycle + Collection cycle – (Payment cycle+1)

Cash conversion cycle = 33 + 19 - (12+1) = 39 days

jeff jeffy answered 1 year ago
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