Calculate the firm's cash conversion cycle given annual sales are $660,000 and cost of goods...

Question:

Calculate the firm's cash conversion cycle given annual sales are {eq}\$660,000 {/eq} and cost of goods represent {eq}80 \% {/eq} of sales. Assume a {eq}365 {/eq}-day year.

Cash Conversion Cycle

The cash conversion cycle (CCC) is a numeric measure(number of days) that shows the time it takes for a company to sell inventory and collect the cash from the sales and also the amount of time it has to be able to pay the creditors. A stable or decreasing CCC is a good sign that the company is able to manage its operations well

Answer and Explanation: 1

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The Cash Conversion Cycle is calculated as shown below;

{eq}Cash~Conversion~Cycle~=~Days~Inventory~Outstanding~+~Days~Sales~Outstanding~-~Days~Payabl...

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Operating Cycle & Cash Cycle: Definition & Calculations

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Chapter 17 / Lesson 2
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The operating cycle and cash conversion cycle are both tools to evaluate the timeline of when a business will become profitable. Explore the calculations of each, and identify their importance to a business.


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