Question

You are the new manager of Accounts Payable. As a proud UM graduate, you have worked...

You are the new manager of Accounts Payable. As a proud UM graduate, you have worked hard and reduced the AP balance below by 9.5%. What is the new CashCT value (in days) given the following data before your improvements: Days in the period: 85 Sales: $15525000 AR: $3060000 AP: $5450000 Inventory: $4450000 Cost of Sales: 73.2 (Keep two decimal places in your answer)

(Probably have to use Excel or calculator for these)

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Answer #1

ANSWER

Cash Conversion Cycle = (Average Inventory / (Cost of Goods Sold /days in the period)) + (Accounts Receivable / (Net Sales/days in the period)) – (Accounts payable / (Cost of Goods Sold / days in the period))

=(4450000 / (7320000/85))+(3060000 /(15525000 /85))-(5450000 /(7320000/85))

=(4450000 /86117.65)+(3060000 /182647.06)-(5450000 /86117.65)

=51.67+16.75-63.28

=5.14 days new Cash CT VALUE with AP BALANCE OF 5450000 -9.5%

=4,932,250

=51.67+16.75-57.27

=11.15 Days

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