Cash Conversion Cycle Analysis

User Generated

zfalqre3

Business Finance

Description

Purpose of Assignment

The purpose of this assignment is to help students gain a better understanding of calculations of cash flow and strategies to increase it.

Assignment Steps

Select a multinational company from the following industries:

  • Retail
  • Pharmaceutical
  • Computer Hardware
  • Manufacturing
  • Automotive

Review the selected company's most recent financial statements.

Calculate the following cash conversion cycle ratios based on the financial statements using Microsoft® Excel®:

  • Average inventory
  • Inventory turnover rate
  • Average account receivable
  • Account receivable turnover
  • Average collection cycle
  • Average Payment Cycle

Explain the importance of the cash conversion cycle, including:

  • Discuss the purpose of the cash conversion cycle and its components.
  • Analyze the results obtained in the cash conversion cycle equations.
  • Propose strategies to increase the cash flows of the company under study.
  • Calculations need to be included in the analysis/explanation paper.

Format your paper consistent with APA guidelines.

Include excel document where you did your calculations.

User generated content is uploaded by users for the purposes of learning and should be used following Studypool's honor code & terms of service.

Explanation & Answer

Attached.

Running head: CASH CONVERSION CYCLE

Cash conversion cycle analysis
Students name
Institution

2
CASH CONVERSION CYCLE

The cash conversion cycle is a good for a company when evaluating the efficiency of a
company’s operations. The conversion cycle tells us how quick a company converts its products
into cash. It is always better when it is easy for a company to convert product into cash. It
expresses the length of time in days. The cash conversion cycle is calculated by summing days
sales outstanding and days inventory outstanding less days payable outstanding.

The cash conversion cycle is composed of revenues and cost of goods sold, beginning and
ending account receivables, beginning and ending account payable and the number of days in a
year usually 365. The companies from the different industries selected for study are Walmart,
Gsk, Apple Inc., IBM and ford motors.

Revenues and cost of goods sold are found in the income statement. The two amounts indicate
the amount received by the company and the amount spent respectively for the inventories in a
year. The two are the best indications on what the company was able to purchase in a year and
sell. Account receivables are the amount in which the company is expecting to receive during
that particular time. Accounts payable are the amount in which the company is expected to pay
to the suppliers at...


Anonymous
Nice! Really impressed with the quality.

Studypool
4.7
Trustpilot
4.5
Sitejabber
4.4

Related Tags