ABC Company Ltd. has annual revenues of $750 million and annual cost of goods sold of $450 million. Annual cash flows from operations are $51 minion, while daly credit sales were $163,548. It published its annual report for the financial year 2021-22 ending, with the following balance sheet items as at 31 march 2022:Ending inventory: $82 millionEnding accounts receivable: $56 millionEnding accounts payable: $43 million ABC Co. Lid, treasurers forecast the following balance pattern for monthlycollections:Month 0: 5%Month 1: 40%Month 2 35%Month 3: 15%Month 4: 5% Required:a) Calculate the Cash Conversion Cycle (CCC) for the company and discuss measures the company could adopt to shorten its CCC.b) What percentage of outstanding sales proceeds are yet to be collected as receivables 3 months after the sales were invoiced?

The following is the following formula to determine the cash conversion cycle:Cash conversion cycle…

Answered: ABC Company Ltd. has annual revenues of…

Managerial Accounting: The Cornerstone of Business Decision-Making

7th Edition

ISBN:9781337115773

Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Chapter14: Statement Of Cash Flows

Section: Chapter Questions

Problem 54P

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ABC Company Ltd. has annual revenues of $750 million and annual cost of goods sold of $450 million. Annual cash flows from operations are $51 minion, while daly credit sales were $163,548. It published its annual report for the financial year 2021-22 ending, with the following balance sheet items as at 31 march 2022:

Ending inventory: $82 million
Ending accounts receivable: $56 million
Ending accounts payable: $43 million

ABC Co. Lid, treasurers forecast the following balance pattern for monthly

collections:

Month 0: 5%
Month 1: 40%
Month 2 35%
Month 3: 15%
Month 4: 5%

Required:

a) Calculate the Cash Conversion Cycle (CCC) for the company and discuss measures the company could adopt to shorten its CCC.

b) What percentage of outstanding sales proceeds are yet to be collected as receivables 3 months after the sales were invoiced?

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