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Assume Amazon’s Cash Conversion Cycle is -20 days. Try to estimate what this was worth to...

  1. Assume Amazon’s Cash Conversion Cycle is -20 days. Try to estimate what this was worth to Amazon in FY 2019. Make whatever assumptions you feel are necessary.

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Answer #1

Cash conversion cycle is a conversion of assets and liabilities into cash as quickly as possible.

The cash cycle of Amazon will be comprised of days inventory outstanding as well as days sales outstanding and days payable outstanding.

Days payable outstanding of Amazon is 20 days whereas days inventory outstanding is 6 days and days sales outstanding is 5 days

Cash conversion cycle=(5+6-20)= -9

Cash conversion cycle of Amazon is in negative and it will mean that the company is paying the creditors in larger time period and it is receiving cash quickly and it has a high liquidity

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