Changes in the Cash Conversion Cycle
Not what you're looking for?
Scenario: Bello Corp. has annual sales of $50,735,000, an average inventory level of $15,012,000, and average accounts receivable of $10,008,000. The company makes all purchases on credit and has always paid on the 30th day. However, it now plans to take full advantage of trade credit and pay its suppliers on the 40th day. The CFO also believes that sales can be maintained at the existing level but inventory can be lowered by $1,946,000 and accounts receivable by $1,946,000. What will be the net change in the cash conversion cycle, assuming a 365-day year?
Purchase this Solution
Solution Summary
The solution discusses changes in the cash conversion cycle.
Solution Preview
Under the current plan:
Accounts receivable period = average receivables/sales * 365
= 10008000*365/50735000 = 72 days
Inventory period = average inventory/COGS* 365
Since COGS is not available, we use sales as proxy
= ...
Purchase this Solution
Free BrainMass Quizzes
Motivation
This tests some key elements of major motivation theories.
Organizational Behavior (OB)
The organizational behavior (OB) quiz will help you better understand organizational behavior through the lens of managers including workforce diversity.
Employee Orientation
Test your knowledge of employee orientation with this fun and informative quiz. This quiz is meant for beginner and advanced students as well as professionals already working in the HR field.
MS Word 2010-Tricky Features
These questions are based on features of the previous word versions that were easy to figure out, but now seem more hidden to me.
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.