Calculate cash conversion cycle ratios based on the financial statements

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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

Explain in 700 words 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.

Format your paper consistent with APA guidelines.

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Explanation & Answer

Attached.

average inventory=(beginning inventory +ending inventory)/2
beginning inventory
$ 89,464,000.00
ending inventory
$ 143,553,000.00
average inventory
$ 116,508,500.00

inventory turnover rate=cost of goods sold/average stock
cost of goods sold
$ 1,940,706,000.00
average stock
$ 116,508,500.00
invetory turnover rate

16.65720527

average accounts receivable=(beginning accounts receivable + ending accounts receivable)/2
beginning accounts receivable
$ 236,620,000.00
ending accounts receivable
$ 364,574,000.00
average accounts receivable
$ 300,597,000.00

account receivable turnover=net credit sales/average accounts receivable
net credit sales
$ 3,156,428,000.00
average acccounts receivable
$ 300,597,000.00
account receivable turnover
10.50053061

average collection cycle=365 days/accounts receivable turnover ratio
accounts receivable turnover ratio
10.5
average collection cycle
34.7619


Running head: CASH CONVERSION CYCLE

Cash Conversion Cycle
Coca-Cola Bottling Co. Consolidated (COKE
Name
Instructor
Institutional Affiliation
Date

CASH CONVERSION CYCLE

2

Purpose of the cash conversion cycle and its components

Cash conversion cycle is a finance concept that provides a metric commonly used in...


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