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# Cash conversion cycle; amount resources; effective rates

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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
cycle.
d. Discuss how management might be able to reduce the cash conversion cycle.

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
cycle.
d. Discuss how management might be able to reduce the cash conversion cycle.

#### Solution Preview

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Hope this will help.

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.
Operating Cycle = Inventory period + Accounts Receivable Period
Operating Cycle = 90 days + 60 days = 150 ...

#### Solution Summary

This post shows how to calculate the firm's operating cycle, cash conversion cycle, amount resources, interest, effective rates on the loan,

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