In fiscal 2010 and 2011, Caterpillar's financial statements included the following items.
|Cost of goods sold||29,179||41,231|
a. What was Caterpillar's cash conversion cycle?
The cash cycle is the time period that a business takes to convert its purchases into sales and the sales into cash. Cash cycle determines the time for which the cash of the business is tied up in the inventory and receivables. It is the difference between the operating cycle and the accounts payable period.
Answer and Explanation: 1
a) Caterpillar's cash conversion cycle for 2011 is 152.84 days.
We know that,
Cash cycle = Inventory period + Receivables...
See full answer below.
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fromChapter 17 / Lesson 2
How can a business owner know how long it takes to make money on purchased supplies or products? In this lesson, we'll examine the two different methods for calculating the length of time it takes to make a profit: the operating cycle and the cash conversion cycle.