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    Discuss how extending credit affects working capital requirements and the cash conversion period (cycle)?

    Evaluate the consequences of inventory costs on Working Capital needs and the Cash Conversion Period.

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    https://brainmass.com/business/management-accounting/extending-credit-affects-working-capital-requirements-135218

    Solution Preview

    Working capital is the firm's total current assets used in operations.
    Working capital = total current assets

    These current assets include cash, marketable securities, prepaid expenses, accounts receivable, inventory, and other current assets. Working capital represents the liquid portion of the firm.

    Use of working capital
    Working capital provides the resources for the day to day operations of the firm.
    Without cash, the firm cannot pay its bills. Without receivables, the company would have difficulty selling merchandise. Without inventory, the firm would be unable to make immediate delivery of goods.

    Net Working Capital means the difference between current assets and current ...

    Solution Summary

    The solution discusses how extending credit affects working capital requirements and the cash conversion period.

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