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A Company has 20 days as average raw material inventory holding period (AAI), 15 days processing time, 10 days finished goods inventory holding time, 20 days’ average receivable collection period (ACP) and 30 days’ average payment period. The Company estimated for 2022 that raw material costs shall be $15 million, processing costs shall be $ 5 million, raw materials and finished goods holding costs shall be $3 million and marketing and collection costs shall be $1 million.         Required   a) Calculate the operating cycle (OC) and cash conversion cycle (CCC)? b) calculate working capital requirement of the company for 2022 assuming 365 days in a year?

A Company has 20 days as average raw material inventory holding period (AAI), 15 days processing time, 10 days finished goods inventory holding time, 20 days’ average receivable collection period (ACP) and 30 days’ average payment period. The Company estimated for 2022 that raw material costs shall be $15 million, processing costs shall be $ 5 million, raw materials and finished goods holding costs shall be $3 million and marketing and collection costs shall be $1 million.         Required   a) Calculate the operating cycle (OC) and cash conversion cycle (CCC)? b) calculate working capital requirement of the company for 2022 assuming 365 days in a year?

Fundamentals Of Financial Management, Concise Edition (mindtap Course List)
Fundamentals Of Financial Management, Concise Edition (mindtap Course List)
10th Edition
ISBN:9781337902571
Author:Eugene F. Brigham, Joel F. Houston
Publisher:Eugene F. Brigham, Joel F. Houston
Chapter16: Financial Planning And Forecasting
Section: Chapter Questions
Problem 14P: EXCESS CAPACITY Krogh Lumbers 2019 financial statements are shown here. Krogh Lumber: Balance Sheet...
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A Company has 20 days as average raw material inventory holding period (AAI), 15 days processing time, 10 days finished goods inventory holding time, 20 days’ average receivable collection period (ACP) and 30 days’ average payment period.

The Company estimated for 2022 that raw material costs shall be $15 million, processing costs shall be $ 5 million, raw materials and finished goods holding costs shall be $3 million and marketing and collection costs shall be $1 million.

 

 

 

 

Required  

a) Calculate the operating cycle (OC) and cash conversion cycle (CCC)?

b) calculate working capital requirement of the company for 2022 assuming 365 days in a year?

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