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/)

A negative cash conversion cycle is a good thing and can
increase the value of a firm.
a) True b) False

Cash Conversion Cycle
Negus Enterprises has an inventory conversion period of 60 days,
an average collection period of 48 days, and a payables deferral
period of 27 days. Assume that cost of goods sold is 80% of sales.
Assume a 365-day year. Do not round intermediate calculations.
What is the length of the firm's cash conversion cycle? Round
your answer to the nearest whole number.
___days
If annual sales are $4,124,500 and all sales are on credit, what
is the...

Apple, whose global sales are generally dollar denominated,
finds it has excess cash of $25,500,000,000, which it can invest
for up to three years. It has determined that its best options are
either a three-year Euro-dollar ($) deposit paying 2.55% or a
three-year SF denominated deposit paying 1.55% since it expects the
SF to appreciate 0.95% per annum against the dollar over the next
three years. Using cash flow analysis determine the best currency
option in which Apple should invest....

Problem 16-11
Cash Conversion Cycle
Negus Enterprises has an inventory conversion period of 62 days,
an average collection period of 35 days, and a payables deferral
period of 36 days. Assume that cost of goods sold is 80% of sales.
Assume 365 days in year for your calculations.
What is the length of the firm's cash conversion cycle?
days
If Negus's annual sales are $3,705,000 and all sales are on
credit, what is the firm's investment in accounts receivable? Round...

Problem 21-11 Cash Conversion Cycle Negus Enterprises has an
inventory conversion period of 59 days, an average collection
period of 47 days, and a payables deferral period of 31 days.
Assume that cost of goods sold is 80% of sales. Assume 365 days in
year for your calculations. What is the length of the firm's cash
conversion cycle? days If Negus's annual sales are $3,651,525 and
all sales are on credit, what is the firm's investment in accounts
receivable? Round...

Apple, whose global sales are generally dollar denominated,
finds it has excess cash of $150,000,000,000, which it can invest
for up to three years. It has determined that its best options are
either a three-year Euro-dollar ($) deposit paying 1.65% or a
three-year Yen denominated deposit paying 0.65% since it expects
the Yen to appreciate 1% per annum against the dollar over the next
three years. Using cash flow analysis determine the best currency
option in which Apple should invest....

Problem 16-11
Cash Conversion Cycle
Negus Enterprises has an inventory conversion period of 72 days,
an average collection period of 50 days, and a payables deferral
period of 29 days. Assume that cost of goods sold is 80% of sales.
Assume 365 days in year for your calculations.
What is the length of the firm's cash conversion cycle?
days
If Negus's annual sales are $3,757,625 and all sales are on
credit, what is the firm's investment in accounts receivable? Round...

Problem 16-11
Cash Conversion Cycle
Negus Enterprises has an inventory conversion period of 80 days,
an average collection period of 47 days, and a payables deferral
period of 33 days. Assume that cost of goods sold is 80% of sales.
Assume 365 days in year for your calculations.
What is the length of the firm's cash conversion cycle?
days
If Negus's annual sales are $3,693,025 and all sales are on
credit, what is the firm's investment in accounts receivable? Round...

Westerly Industries has the following financial information.
What is its cash conversion cycle? (Hint: Use a 365-day
year.)
Sales
$110 comma 000110,000
Cost of Goods Sold
88 comma 00088,000
Accounts Receivable
35
comma 20035,200
Inventory
19
comma 80019,800
Accounts Payable
47 comma 30047,300
The cash conversion cycle is
nothing
days. (Round to two decimal places.)

Whitson Co. is looking for ways to shorten its cash conversion
cycle. It has annual sales of $45,625,000, or $125,000 a day on a
365-day basis. The firm's cost of goods sold is 60% of sales. On
average, the company has $7,500,000 in inventory, $5,750,000 in
accounts receivable, and $2,750,000 in accounts payable. Its CFO
has proposed new policies that would result in a 25% reduction in
both average inventories and accounts receivable, and a 10%
increase in average accounts...

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