Xtreme Toys® is a small manufacturing company in Southern California. Management is concerned because as their sales have grown, their cash flow has shrunk. Management doesn't understand how this could happen and has approached your team to find a solution for this dilemma.
Calculate the following:
a) Operating cycle
b) Cash conversion cycle (cash gap)
If the company's cost of funds is 8%, what is the annual cost of financing the cash gap?
The solution explains how to calculate the operating cycle and cash conversion cycle