Module 5 – Case
SHORT-TERM FINANCIAL MANAGEMENT
Cash Conversion Cycle
This assignment contains two parts: Part I and Part II.
Answer these questions in Word and show your work:
Assume that a company has $20 million in revenue and its cost of goods sold is 70% of its sales. Additionally, the firm has $3 million of inventories, $2 million in payables, and $2 million in receivables. What’s the firm’s cash conversion cycle (CCC)? What does this indicate? Do you think that the company should improve its CCC? If so, what are some ways that it can do that? If not, why do you think that’s the case?
Assume that a firm has a payables deferral period of 40 days, an inventory conversion period of 62 days, and an average collection period of 29 days.
What’s the firm’s cash conversion cycle?
Assume that all of the firm’s sales are on credit. If the firm has annual sales of $4 million, what’s the accounts receivable investment
How many times a year will the firm turn over its inventory?
You are expected to:
Describe the purpose of the report and provide a conclusion. An introduction and a conclusion are important because many busy individuals in the business environment may only read the first and the last paragraph. If those paragraphs are not interesting, they never read the body of the paper.
Answer the Case Assignment question(s) clearly and provide necessary details.
Write clearly and correctly-that is, no poor sentence structure, no spelling and grammar mistakes, and no run-on sentences.
Provide citations to support your argument and references on a separate page. (All the sources that you listed in the references section must be cited in the paper.) Use APA format to provide citations and references.
Type and double-space the paper.
Whenever appropriate, please use Excel to show supporting computations in an appendix, present financial information in tables, and use the data computed to answer follow-up questions. In finance, in addition to being able to write well, it’s important to present information in a professional manner and to analyze financial information. This is part of the assignment expectations and will be considered for grading purposes.