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Cash conversion cycle

Acme Corp is a company in Florida. 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.

Part I
Calculate the following: (from attached excel doc)
1. Inventory conversion period
2. Payables deferral period
3. Receivables conversion period
4. Operating cycle
5. Cash conversion cycle (cash gap)
If the company's cost of funds is 8%, what is the annual cost of financing the cash gap?

Part II
Explain to Acme management how rising sales could cause a decrease in the company's cash position and provide three specific recommendations to management on ways to reduce the cash gap.

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Acme Corp is a company in Florida. 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 ...

Solution Summary

This helps in computing cash conversion cycle

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