Cash conversion cycle American Products is concerned about managing cash efficiently. On the average, inventories have an age of 90 days, and accounts receivable are collected in 60 days. Accounts payable are paid approximately 30 days after they arise. The firm has annual sales of about $30 million. Assume there is no difference in the investment per dollar of sales in inventory, receivables, and payables; and a 365-day year.

a. Calculate the firm's operating cycle.
b. Calculate the firm's cash conversion cycle.
c. Calculate the amount of resources needed to support the firm's cash conversion
d. Discuss how management might be able to reduce the cash conversion cycle

  1. 👍
  2. 👎
  3. 👁
  1. a.90+60=150
    c. 30million/365 x 120=9.9million
    d.decrease inventory age or accounts receivable, or increase accounts payable

    1. 👍
    2. 👎

Respond to this Question

First Name

Your Response

Similar Questions

  1. accounting

    Replenished the $200.00 petty cash fund. Receipts were submitted for the following:office supplies, $35.00, store supplies, $50.00, and miscellaneous, $42.00. A cash count shows $72.00 in the petty cash box. Do you start with

  2. acc/291

    A measure useful in evaluating the efficiency in managing inventories is:

  3. consumer math

    Jim Tree has $3,300 in cash and $3,300 in owners equity. The following transactions take place. You withdraw $500 for yourself, You sell a workbench which originally cost you $800, for $950 cash. You pay $60 in cash for truck

  4. Statistics

    A retail shop accepts only cash or checks. Suppose that 54% of its customers carry cash, 51% carry checks, and 71% carry cash or checks (or both). What is the probability that a randomly chosen customer at the shop is carrying

  1. business

    A petty cash fund of $100 is replenished when the fund contains $3 in cash and receipts for $93. The entry to replenish the fund would debit Cash Over and Short for $4. credit Miscellaneous Revenue for $4. credit Cash Over and

  2. finance (depreciation)

    Depreciation is a source of cash inflow because? A. it is a tax-deductible non-cash expense B. is supplies cash for future asset purchases C. it is a tax-deductible cash expense D. it is a taxable expense My answer is A because

  3. Principles of Accounting

    E2-2 Selected transactions for D. Reyes, Inc., an interior decorating firm, in its first month of business, are as follows. Jan. 2 Invested $10,000 cash in the business in exchange for common stock. 3 Purchased used car for $4,000

  4. accounting help please?!

    Nancy Sly wishes to sell her business and receives the following three offers:? 1. $568,000 cash immediately. 2. $200,000 cash now plus an annual installment of $60,000 at the end of each year for 10 years, a total of $800,000. 3.

  1. accounting

    Specify which of the following cash transactions would have resulted in the $4,100 posting to the account. (You select more than one answer. Single click the box with a check mark for correct answers and double click to empty the

  2. fin 324

    5.) Managing Working Capital. A new computer system allows your firm to more accurately monitor inventory and anticipate future inventory shortfalls. As a result, the firm feels more able to pare down its inventory levels. What

  3. Accounting

    Dukas Corporation's net cash provided by operating activities was $218,000; its net income was $203,000; its capital expenditures were $146,000; and its cash dividends were $49,000. Required: What is the company's free cash flow?

  4. Finance

    How does selling $5 million of marketable securities for cash affect cash and net working capital?

You can view more similar questions or ask a new question.