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# Analysis of a Financial Institution

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Question 1:

Cash cycle is simply the amount of time, usually expressed in days, for a company, say a manufacturer, converts its raw materials to cash. This means that the cycle encompasses the period it takes to convert raw materials to finished goods to sales, the period it takes to collect credit sales less the period it takes the company to pay off its trade payables.

Question 2:

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Below is your study guide. Please note that for it to be effective, I didn't provide the final answer. As an expert, I have created a tutorial for you.

Question 1:

Cash cycle is simply the amount of time, usually expressed in days, for a company, say a manufacturer, converts its raw materials to cash. This means that the cycle encompasses the period it takes to convert raw materials to finished goods to sales, the period it takes to collect credit sales less the period it takes the company to pay off its trade payables.

Formula = Inventory conversion + Receivables conversion - Payables conversion
Inventory conversion = Average inventory/(Cost of goods sold/365 days)
Receivables conversion = Average accounts receivable /(Credit sales/365 days)
Payables conversion = Average accounts payable/(Purchases/365 days)

Note that sometimes 360 days is used instead of 365 days.

For this particular problem, use the amount specified as debtors and creditors for average receivables and payables, respectively.

Cash turnover rate measures ...

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## Credit risk analysis

How are financial ratios used in credit risk departments in financial institutions?

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