Purchase Solution

Cash Conversion Cycle Problem

Not what you're looking for?

Ask Custom Question

Coffee Mill Inc. has calculated its inventory conversion period as 53 days, its accounts receivable collection period as 40 days, and its accounts payable deferral period as 20 days. Coffee Mill's working capital financing needs average $50,000 per day.

(a) Calculate Coffee Mill's Cash Conversion Cycle.

(b) If Coffee Mill were to shorten its inventory conversion period by 10 days, what effect would this have on the Cash Conversion Cycle?

(c) What effect (in dollars) would (b) have on Coffee Mill's total working capital needs?

Please explain your answers in detail.

Purchase this Solution

Solution Summary

This solution helps with cash conversion cycle problems. it involves calculating cash conversion cycle, the effects of inventory conversion on cash conversion cycle, and the effects on total working capital needs. Step by step calculations are provided.

Solution Preview

(a) Calculate Coffee Mill's Cash Conversion Cycle.

Cash conversion cycle is the total time from the date the company makes payment for its inventory till it receives cash from the related sales. It is calculated as
Cash conversion cycle = AR days + ...

Purchase this Solution


Free BrainMass Quizzes
Lean your Process

This quiz will help you understand the basic concepts of Lean.

Business Processes

This quiz is intended to help business students better understand business processes, including those related to manufacturing and marketing. The questions focus on terms used to describe business processes and marketing activities.

Marketing Research and Forecasting

The following quiz will assess your ability to identify steps in the marketing research process. Understanding this information will provide fundamental knowledge related to marketing research.

Academic Reading and Writing: Critical Thinking

Importance of Critical Thinking

Accounting: Statement of Cash flows

This quiz tests your knowledge of the components of the statements of cash flows and the methods used to determine cash flows.