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    Cash Conversion Cycle

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    A company has credit sales of $6 million annually and purchases $3 million from its suppliers. The company receives credit terms of 1/10, net 40 from its suppliers and extends credit terms of 2/10, n30 to its customers. The company takes the discount and pays its suppliers on day 10. On average, the company's customers pay on day 20. The company's inventory conversion period is 40 days. What are the levels of accounts receivable & accounts payable shown on the balance sheet? What is the company's cash conversion?

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    https://brainmass.com/business/management-accounting/cash-conversion-cycle-51676

    Solution Preview

    A company has credit sales of $6 million annually and purchases $3 million from its suppliers. The company receives credit terms of 1/10, net 40 from its suppliers and extends credit terms of 2/10, n30 to its customers. The company takes the discount and pays its suppliers on day 10. On average, the company's customers pay on day 20. The company's inventory conversion ...

    Solution Summary

    The solution calculates levels of accounts receivable & accounts payable and the company's cash conversion cycle.

    $2.19

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