CASH CONVERSION CYCLE American Products is concerned about managing cash efficiently. On average, inventories have an age of 80 days, and accounts receivable are collected in 40 days. Accounts payable are paid approximately 30 days after they arise. The firm has annual sales of about $30 million. Goods sold total $20 million, and purchases are $15 million. Calculate the firm’s operating cycle. Calculate the firm’s cash conversion cycle. Calculate the amount of resources needed to support the firm’s cash conversion cycle. Discuss how management might be able to reduce the
CASH CONVERSION CYCLE American Products is concerned about managing cash efficiently. On average, inventories have an age of 80 days, and accounts receivable are collected in 40 days. Accounts payable are paid approximately 30 days after they arise. The firm has annual sales of about $30 million. Goods sold total $20 million, and purchases are $15 million. Calculate the firm’s operating cycle. Calculate the firm’s cash conversion cycle. Calculate the amount of resources needed to support the firm’s cash conversion cycle. Discuss how management might be able to reduce the
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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P15–1 CASH CONVERSION CYCLE American Products is concerned about managing cash efficiently. On average, inventories have an age of 80 days, and accounts receivable are collected in 40 days. Accounts payable are paid approximately 30 days after they arise. The firm has annual sales of about $30 million. Goods sold total $20 million, and purchases are $15 million.
Calculate the firm’s operating cycle.
Calculate the firm’s cash conversion cycle.
Calculate the amount of resources needed to support the firm’s cash conversion cycle.
Discuss how management might be able to reduce the cash conversion cycle.
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