a) Calculate the firm’s operating cycle.  b) Calculate the firm’s cash conversion cycle c) Calculate the amount of resources needed to support the firm’s cash  conversion cycle

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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American Products is concerned about managing cash efficiently. On the 
average, inventories have an age of 90 days, and accounts receivable are 
collected in 60 days. Accounts payable are paid approximately 30 days after they 
arise. The firm has annual sales of about $30 million. Assume there is no 
difference in the investment per dollar of sales in inventory, receivables, and 
payables and that there is a 365-day year. 
a) Calculate the firm’s operating cycle. 
b) Calculate the firm’s cash conversion cycle
c) Calculate the amount of resources needed to support the firm’s cash 
conversion cycle.

 

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