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
Social Media: Pinterest

This quiz introduces basic concepts of Pinterest social media

Balance Sheet

The Fundamental Classified Balance Sheet. What to know to make it easy.

Paradigms and Frameworks of Management Research

This quiz evaluates your understanding of the paradigm-based and epistimological frameworks of research. It is intended for advanced students.

Understanding Management

This quiz will help you understand the dimensions of employee diversity as well as how to manage a culturally diverse workforce.

Organizational Leadership Quiz

This quiz prepares a person to do well when it comes to studying organizational leadership in their studies.

View More Free Quizzes
Related BrainMass Solutions

  • Operating cycle and cash conversion cycle

    60069 Operating cycle and cash conversion cycle I am racking my brain trying to figure out the attached problem and I am in need of some help! If you could give a detailed explaination to each of your steps it would be most appreciated.

  • Cash Conversion Cycle

    275213 Cash Conversion Cycle: Example Problem Westley Company's average age of accounts receivable is 90 days, the average age of accounts payable is 45 days, and the average age of inventory is 72 days.

  • Operating cycle and the cash conversion cycle for Latigo

    Compute the operating cycle and the cash conversion cycle for Latigo. d. The industry average cash conversion cycle is 112 days. Compare the industry to Latigo and identify any inferences that you can make.

  • Cash Conversion Cycle

    48070 Cash Conversion Cycle Financial Problem Conversion Cycle. What effect will the following have on the cash conversion cycle? a. Customers are given a larger discount for cash transactions. b.

  • Effect on cash conversion cycle

    43329 Not sure if this problem went through the first time Cash Conversion Cycle. What effect will the following events have on the cash conversion cycle? a. Higher financing rates induce the firm to reduce its level of inventory. b.

  • Cash convergence cycle

    Operating cycle is calculated as = Inventory conversion period+ Receivables conversion period Cash conversion cycle= Operating cycle- Accounts payable deferral period Accounts payable deferral period depends on account payable terms.

  • Cash conversion cycle :sample question

    20351 Cash conversion cycle :sample question 6) Cash Conversion Cycle - Calculate the accounts receivable period, accounts payable period, inventory period, and cash conversion cycle for the following firm: Income statement data: Sales

  • Cash Conversion Cycle

    59662 Cash Conversion Cycle Cash conversion cycle Problem . Kolan Inc. has annual sales of $36,500,000 ($100,000 a day on a 365-day basis).

  • Need to solve the following problem

    Cash conversion cycle (cash gap); f. If the company's cost of funds is 8%, what is the annual cost of financing the cash gap? Your problem has been answered on the excel attachment.

View More Related Solutions