Cash conversion cycle American Products is concerned about managing cash efficiently. On the average, inventories have an age of 83 days, and accounts receivable are collected in 45 days. Accounts payable are paid approximately 26 days after they arise. The firm has annual sales of abou $35 million. Cost of goods sold are $20 million, and purchases are $14 million. 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. d. Discuss how management might be able to reduce the cash conversion cycle.
Cash conversion cycle American Products is concerned about managing cash efficiently. On the average, inventories have an age of 83 days, and accounts receivable are collected in 45 days. Accounts payable are paid approximately 26 days after they arise. The firm has annual sales of abou $35 million. Cost of goods sold are $20 million, and purchases are $14 million. 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. d. Discuss how management might be able to reduce the cash conversion cycle.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Transcribed Image Text:Cash conversion cycle American Products is concerned about managing cash efficiently. On
the average, inventories have an age of 83 days, and accounts receivable are collected in 45 days.
Accounts payable are paid approximately 26 days after they arise. The firm has annual sales of about
$35 million. Cost of goods sold are $20 million, and purchases are $14 million.
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.
d. Discuss how management might be able to reduce the cash conversion cycle.
a. American Products' operating cycle, OC, is days. (Round to the nearest whole number.)
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