Question
In: Finance
What is the cash conversion cycle of this company? Please show your working. Annual Sales: €35,000...
What is the cash conversion cycle of this company? Please show your working.
Annual Sales: €35,000
Average Accounts Receivables: €750
COGS: €20,000
Average Inventories: €3,000
Average Trade Payables: €1,500
Solutions
Expert Solution
Solution: Cash Conversion Cycle calculation measures how long cash is tied up in inventory and other resources input into cash. we divide it into 3 parts
1st Part: Inventory : it represent how long will company take to sell this inventory
2nd part: it represent the current sales and the amount of time it takes to collect the cash from these sales.
3rd part: it represent when company will pay to his vendors for purchased goods.
Cash Conversion Cycle= Days Inventory Outstanding+Days of Sales Outstanding + Days Payable Outstanding
Days Inventory Outstanding= Average inventory/Cost of goods sold*365
= 3000/20000*365=54.75 days Round of 55 days
Days of Sales Outstanding= AccountReceivable/ Net credit Sale*365
= 750/35000*365=7.82 days = 8 days
Days Payable Outstanding= Accounts Payable/ Cost of goods sold*365
= 1500/20000*365= 27.37= 27 days
According to Formula= 55+8-27=36 days
High Cash conversion cycle means companyis inefficient to measure the cash.
Low cash conversion cycle means company is efficient in managing cash
Conclusion: Answer is 36 days
jeff jeffy answered 2 years agoRelated Solutions
Marshall Inc. is looking for ways to shorten its cash conversion cycle. It has annual sales...
Marshall Inc. is looking for ways to shorten its cash conversion
cycle. It has annual sales of $36,500,000, or $100,000 a day on a
365-day basis. The firm's cost of goods sold is 75% of sales. On
average, the company has $9,000,000 in inventory and $8,000,000 in
accounts receivable. Its CFO has proposed new policies that would
result in a 20% reduction in inventory conversion period and a 10%
in DSO. She also anticipates that the payables deferral period
would...
Whitson Co. is looking for ways to shorten its cash conversion cycle. It has annual sales...
Whitson Co. is looking for ways to shorten its cash conversion
cycle. It has annual sales of $45,625,000, or $125,000 a day on a
365-day basis. The firm's cost of goods sold is 65% of sales. On
average, the company has $7,500,000 in inventory, $5,750,000 in
accounts receivable, and $2,750,000 in accounts payable. Its CFO
has proposed new policies that would result in a 25% reduction in
both average inventories and accounts receivable, and a 10%
increase in average accounts...
Whitson Co. is looking for ways to shorten its cash conversion cycle. It has annual sales...
Whitson Co. is looking for ways to shorten its cash conversion
cycle. It has annual sales of $45,625,000, or $125,000 a day on a
365-day basis. The firm's cost of goods sold is 65% of sales. On
average, the company has $7,500,000 in inventory, $5,750,000 in
accounts receivable, and $2,750,000 in accounts payable. Its CFO
has proposed new policies that would result in a 25% reduction in
both average inventories and accounts receivable, and a 10%
increase in average accounts...
Whitson Co. is looking for ways to shorten its cash conversion cycle. It has annual sales...
Whitson Co. is looking for ways to shorten its cash conversion
cycle. It has annual sales of $45,625,000, or $125,000 a day on a
365-day basis. The firm's cost of goods sold is 70% of sales. On
average, the company has $7,500,000 in inventory, $5,750,000 in
accounts receivable, and $2,750,000 in accounts payable. Its CFO
has proposed new policies that would result in a 25% reduction in
both average inventories and accounts receivable, and a 10%
increase in average accounts...
Whitson Co. is looking for ways to shorten its cash conversion cycle. It has annual sales...
Whitson Co. is looking for ways to shorten its cash conversion
cycle. It has annual sales of $45,625,000, or $125,000 a day on a
365-day basis. The firm's cost of goods sold is 75% of sales. On
average, the company has $7,500,000 in inventory, $5,750,000 in
accounts receivable, and $2,750,000 in accounts payable. Its CFO
has proposed new policies that would result in a 25% reduction in
both average inventories and accounts receivable, and a 10%
increase in average accounts...
Whitson Co. is looking for ways to shorten its cash conversion cycle. It has annual sales...
Whitson Co. is looking for ways to shorten its cash conversion
cycle. It has annual sales of $45,625,000, or $125,000 a day on a
365-day basis. The firm's cost of goods sold is 60% of sales. On
average, the company has $7,500,000 in inventory, $5,750,000 in
accounts receivable, and $2,750,000 in accounts payable. Its CFO
has proposed new policies that would result in a 25% reduction in
both average inventories and accounts receivable, and a 10%
increase in average accounts...
Q1.Whitson Co. is looking for ways to shorten its cash conversion cycle. It has annual sales...
Q1.Whitson Co. is looking for ways to shorten its cash
conversion cycle. It has annual sales of $45,625,000, or $125,000 a
day on a 365-day basis. The firm's cost of goods sold is 80% of
sales. On average, the company has $7,500,000 in inventory,
$5,750,000 in accounts receivable, and $2,750,000 in accounts
payable. Its CFO has proposed new policies that would result in a
25% reduction in both average inventories and accounts receivable,
and a 10% increase in average accounts...
explain the cash conversion cycle .describe the cscc for your employer or company in an industry...
explain the cash conversion cycle .describe the cscc
for your employer or company in an industry in which you are
interested. what are some specific things that your company could
do to decrease your cash conversion cucle
Explain the cash conversion cycle (CCC). Describe the CCC for your employer or company in an...
Explain the cash conversion cycle (CCC). Describe the CCC for
your employer or company in an industry in which you're interested.
What are some specific things that your company could do to
decrease your cash conversion cycle? Let's be sure to describe, in
pretty specific terms, the CCC for our company and what could be
done to shorten it.
Explain the cash conversion cycle (CCC). Describe the CCC for your employer or company in an...
Explain the cash conversion cycle (CCC). Describe the CCC for
your employer or company in an industry in which you're interested.
What are some specific things that your company could do to
decrease your cash conversion cycle? Let's be sure to describe, in
pretty specific terms, the CCC for our company and what could be
done to shorten it.
ADVERTISEMENT
ADVERTISEMENT
Latest Questions
- 3) You are rolling a 12 sided die 8 times. a) What is the size for...
- explain the difference between quantitative and qualitative research strategies. Provide an example of a crime based...
- use postorder and inorder tree traversals to make preorder traversal. #!/usr/bin/env python3 # encoding: UTF-8 """Turning...
- 1. Write an if-else statement to describe an object. Print "Balloon" if isBalloon is true and...
- An investor is considering purchasing a Treasury bond with a 20 year maturity, an 8% coupon...
- Write a program that copies the contents of one file to a destination file. This program...
- how to conduct a marketing mix for 3d crest white strips
ADVERTISEMENT