Question

Hi please assist me in answering question in short essay type format a & b separate. Thank you so much.

1a) Discuss the cash conversion cycle. What are the 3 stages and how is it calculated.

1b) Discuss what is finiancial planning. Provide meaning of Financial Planning, Types of Financial Plan (medium, short term, long term). What period it covers?

Answer 1

1.A. cash conversion cycle is cycle during which various receivables and payables are converted into cash and it will reflect the liquidity of the company.

three stages of cash conversion cycle for days inventory outstanding which will be calculated in order of conversion of inventory into finished goods and sell them in order of realisation of the cash.

Second stage of cash conversion cycle is days sales outstanding and it will reflect how many days debtors are keeping up with the money and realisation are made from them.

Third stage of cash conversion cycle will be made payable outstanding and it will reflect the the time duration during which company is making its payment in cash to the creditors.

1.B. Financial planning means planning of various financial resources in order of achievement of various financial goals .

there could be medium type of financial planning which will be covering the time duration of 3 to 5 years.

Short term financial planning will mostly be less than 3 years and it will be done in order of achievement of short term objectives.

long term financial planning is mostly done in order to achieve the long-term objectives of the company which will be more than 5 years for a longer period of time