P13-1 Cash Conversion Cycle and Operating Cycle for American Products
Not what you're looking for?
P13-1 Cash conversion cycle American Products is concerned about managing cash efficiently. On the average, inventories have an age of 90 days, and accounts receivable are collected in 60 days. Accounts payable are paid approximately 30 days after they arise. The firm has annual sales of about $30 million. Assume there is no difference in the investment per dollar of sales in inventory, receivables, and payables; and a 365-day year.
a. Calculate the firm's operating cycle.
b. Calculate the firm's cash conversion cycle.
c. Calculate the amount of resources needed to support the firm's cash conversion
cycle.
d. Discuss how management might be able to reduce the cash conversion cycle.
Purchase this Solution
Solution Summary
This solution provides calculations for the firm's operating cycle, cash conversion cycle, and resources needed. It also provides two recommendations for reducing the cash conversion cycle.
Solution Preview
Please see the attached file
a. Calculate the firm's operating cycle.
Operating cycle = Average age of inventories
OC + Average collection period
= 90 days + 60 days
= 150 days
b. ...
Purchase this Solution
Free BrainMass Quizzes
Lean your Process
This quiz will help you understand the basic concepts of Lean.
Motivation
This tests some key elements of major motivation theories.
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.
Managing the Older Worker
This quiz will let you know some of the basics of dealing with older workers. This is increasingly important for managers and human resource workers as many countries are facing an increase in older people in the workforce
Situational Leadership
This quiz will help you better understand Situational Leadership and its theories.