Explain what cash management is and its relationship to the cash conversion cycle and why cash...

Explain what cash management is and its relationship to the cash conversion cycle and why cash management is so important in the health care industry.

Expert Solution

Cash management is a process of collecting, usage and handling of cash. It is a wider aspect which deals with how cash flows should be adequately managed for a firm's advantage

Cash conversion cycle reflects how efficiently managers are using the overall working capital . It measures the cycle between purchase of an inventory to receipts of cash from account receivable.

Cash management is directly related to cash conversion cycle as the lower the cycle will be, the better liquidity the company will have leading to better Management of it's working capital leading to better cash management.

Cash management in a healthcare industry is important as it is related to providing better facilities to the patients and the cash management becomes more efficient in achieving the financial goals of the Company. It helps in making sure that organization has better and adequate funds as well as better collection mechanism so that time and resources are utilised properly.

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