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Cash conversion cycle

The three overall strategies for effective and efficient management of cash include inventory, accounts receivables and accounts payable. Explain how the effective management of these 3 components impacts your cash conversion cycle.

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Operating Cycle is defined as the time duration, which the firm requires to manufacture and sell the product and collect cash. Thus operating cycle refers to the acquisition of resources, conversion of raw materials into work-in-process into finished goods, conversion of finished goods into sales and collection of sales.
Larger is the operating cycle, larger will be the investment in current assets.

In practice, firms are acquire resources on credit. To that extent, firm's need to raise working finance is reduced. Net Operating Cycle is used for the difference between operating cycle (or gross operating cycle) and the payment deferral period (or the period for which ...

Solution Summary

This discusses the strategies to manage the Cash conversion cycle effectively