EBK OM
6th Edition
ISBN: 9781305888210
Author: Collier
Publisher: YUZU
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Chapter 12, Problem 4PA
Summary Introduction
Interpretation:Cash to cash conversion cycle of the business is to be calculated along with the recommendations that can be made to improve performance.
Concept Introduction:Cash to cash conversion cycle measures the time that the company takes to convert its investments in inventory into cash. The less time it takes the more profits that the company may achieve. That means a negative cash flow will help the company in reaching a highest performance level.
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As an operations management consultant, you have been asked to evaluate a furniture manufacturer’s cash-to-cash conversion cycle under the following assumptions: sales of $23.5 million, cost of goods sold of $20.8 million, 50 operating weeks a year, total average on-hand inventory of $2,150,000, accounts receivable equal to $2,455,000, and accounts payable of $3,695,000.
What do you conclude? What would be the impact of reducing the accounts payable from $3,695,000to $2,000,000 and all other data remained the same?
As an operations management consultant, you have been asked to evaluate a furniture manufacturer’s cash to cash conversion cycle under the following assumptions: sales of $23.5 million, cost of goods sold of $20.8 million, 50 operating weeks a year, total average on hand inventory of $2,150,000, accounts receivable equal to $2,455,000, and accounts payable of $3,695,000.
a. What would be the impact of reducing the accounts payable from $3,695,000to $2,000,000 and all other data remained the same? Please show in detail these impacts quantitatively in your answers
As an operations management consultant, you have been asked to evaluate a furniture manufacturer’s cash to cash conversion cycle under the following assumptions: sales of $23.5 million, cost of goods sold of $20.8 million, 50 operating weeks a year, total average on hand inventory of $2,150,000, accounts receivable equal to $2,455,000, and accounts payable of $3,695,000.
What do you conclude?
What recommendations can you make to improve performance?
What would be the impact of reducing the accounts payable from $3,695,000to $2,000,000 and all other data remained the same? Please show in detail these impacts quantitatively in your answers.
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