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    Cash conversion cycle

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    You were recently hired as CFO to improve the performance of Dennis Systems, which is highly profitable but has been experiencing cash shortages due to its high rate of growth. As one part of your analysis, you want to determine the firm's cash conversion cycle. Using the following information and a 365-day year, what is your estimate of the firm's present cash conversion cycle?

    Average inventory: $120,000
    Annual sales: $600,000
    Average accounts receivable: $160,000
    Average accounts payable: $25,000
    Total annual purchases: $365,000
    Buy on net 30 days, no discounts: 30
    Sell on net 50 days, no discounts: 50

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    https://brainmass.com/business/management-accounting/cash-conversion-cycle-294819

    Solution Preview

    Cash conversion cycle = AR days + Inventory Days - Payable days
    AR days = Average accounts receivables/(Sales/365) = ...

    Solution Summary

    The solution explains how to determine the cash conversion cycle.

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