Question

Apple has a negative cash conversion cycle, does this mean that Apple can invest the excess cash it is holding? Is Apple's cash conversion cycle dependent on its business model? Please provide two other examples where the cash conversion cycle is dependent on a company’s business model.

Answer 1

Negative conversion cycle means a company received cash from its customers before it requires to pay to its suppliers. This means the company doesn't pay its suppliers for the goods bought until it receives payment for selling those goods. excess amount received can be invested if all the payments to suppliers have been made.

Yes apple cash conversion cycle is based on its business model as it has efficient contract manufacturers who delivers products quickly, in it retail stores they get paid quickly in cash or credit & as these days it has a huge demand so able to mange good credit terms in market.

2 Examples where the cash conversion cycle is dependent on a company’s business model one is China mobile & British American Tobacco. ( Have fetched the data from the given link- https://www.wallstreetmojo.com/cash-conversion-cycle/)