Question

1. What is a company's cash conversion cycle and why is it important? 2. What is...

1. What is a company's cash conversion cycle and why is it important?

2. What is the likely impact of a shorter credit period on accounts receivable?

3. What is the likely impact of a loose credit policy on sales?

Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

1. The cash conversion cycle (CCC) refers to a metric that is used to express the time taken for an entity to convert its investments in inventory and other resources into the cash flows from the day of sales.

It is often called CCC and is an important quantitative measures that help in evaluating the efficiency and effectiveness of a company's operations and management.

2. A shorter credit period is beneficial to the company as the cash is collected in a short period. The number of days to get the cash flow is less.

3.A loose credit period is not beneficial to the company as the cash is collected in a very longer period. The number of days to get the cash flow is too huge resulting in loss of opportunity cost.

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Seiko Inc. has the following data. What is the company's cash conversion cycle? Sales per day...
Seiko Inc. has the following data. What is the company's cash conversion cycle? Sales per day $13,500 Annual cost of goods sold $1,300,000 Inventory $2,400,000 Accounts receivable $1,800,000 Accounts payable $2,800,000 (One year has 365 days)
Problem 16-11 Cash Conversion Cycle Negus Enterprises has an inventory conversion period of 62 days, an...
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...
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...
Cash Conversion Cycle Negus Enterprises has an inventory conversion period of 60 days, an average collection...
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...
(1) Use the information below to compute the number of days in the cash conversion cycle...
(1) Use the information below to compute the number of days in the cash conversion cycle for each company. (2) Which company is more effective at managing cash?    Spartan Co. Chen Co. Days' sales in accounts receivable 42 55 Days' sales inventory 25 29 Days' sales in accounts payable 32 37 Spartan Co. Chen Co. Cash to cash conversion cycle More Effective Cash Management    
Which action would NOT be likely to shorten the length of the cash conversion cycle? a....
Which action would NOT be likely to shorten the length of the cash conversion cycle? a. adopting a new inventory system that reduces the inventory conversion period b. reducing the average DSO on its accounts receivable c. reducing the amount of time the company takes to pay its suppliers d. increasing sales while maintaining the same level of receivables
Problem 16-11 Cash Conversion Cycle Negus Enterprises has an inventory conversion period of 72 days, an...
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...
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...
Cash Conversion Cycle. Calculate the (a) accounts receivable period, (b) accounts payable period, (c) inventory period,...
Cash Conversion Cycle. Calculate the (a) accounts receivable period, (b) accounts payable period, (c) inventory period, and (d) cash conversion cycle for the following firm: Income Statement Data:             Sales                            5,000             Cost of goods sold      4,200             Balance sheet data: Beginning of Year End of Year Inventory 500 600 Accounts receivable 100 120 Accounts payable 250 290 Calculate the accounts receivable period: Response (show formula and numerical values): Calculate the accounts payable period Response (show formula and numerical values):...
Calculate the accounts receivable period, accounts payable period, inventory period, and cash conversion cycle for the...
Calculate the accounts receivable period, accounts payable period, inventory period, and cash conversion cycle for the following firm: Income statement data: Sales 5,000 Cost of goods sold 4,200 Balance sheet data: Inventory 550 Accounts receivable 110 Accounts payable 270
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT