Present cash conversion cycle


Your consulting firm was lately hired to enhance the performance of Shin-Soenen Inc, which is highly profitable however has been experiencing cash shortages due to its high growth rate. As one part of your analysis, you wish for to find out the firm's cash conversion cycle. By using the given information and a 365-day year, determine the firm's present cash conversion cycle?

Average inventory = $75,000

Annual sales = $600,000

Annual cost of goods sold = $360,000

Average accounts receivable = $160,000

Average accounts payable = $25,000

a. 120.6 days

b. 126.9 days

c. 133.6 days

d. 140.6 days

e. 148.0 days

Avg. inventory = $75,000 Annual sales = $600,000

Avg. receivables = $160,000 Annual COGS = $360,000

Avg. payables = $25,000 Days in year = 365

Inv. conv. / (COGS/365) 76.0

+ /(Sales/365)  97.3

- Payables /(COGS/365)  -25.3

Cash conversion cycle (CCC) 148.0

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Finance Basics: Present cash conversion cycle
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