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Cash Conversion Cycle Explained

financial statement analysis

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Nguyễn Mai Anh
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12 views2 pages

Cash Conversion Cycle Explained

financial statement analysis

Uploaded by

Nguyễn Mai Anh
Copyright
© All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd

9/21/2024

Cash Conversion Cycle

Cash Conversion Cycle

• The length of time funds are tied up in working capital or the length of time between paying
for working capital and collecting cash from the sale of the working capital.

Inventory + Average - Payable deferral = Cash Conversion Cycle


conversion colletion period
period period
The average time The average The average length of The length of the company they
required to convert raw length of time time between the purchase or produce inventory,
materials into finished required to purchase of materials hold it for a time, and then sell it
goods and then to sell convert the and labor and the and receive cash.
them. firm’s payment of cash for
receivables into them.
cash, that is, to
collect cash
following a
sale.

1
9/21/2024

Cash Conversion Cycle

Cash Conversion Cycle

• The following data were taken from its latest financial statements:
+Annual sales $1,216,666
+ Cost of goods sold 1,013,889
+Inventory 250,000
+ Accounts receivable 300,000 Accounts payable 150,000
Requires: Cash Conversion Cycle?

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