The difference between operating cycle and cash cycle. Introduction: Cash cycle is also termed as cash conversion cycle that measures the time taken to convert the cash into stocks, accounts payable by the way of sales and accounts receivables and again back to cash.

Question

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Answer 1

Question

Chapter 26, Problem 1P

a)

Summary Introduction

To discuss: The difference between operating cycle and cash cycle.

Introduction:

Cash cycle is also termed as cash conversion cycle that measures the time taken to convert the cash into stocks, accounts payable by the way of sales and accounts receivables and again back to cash.

a)

Expert Solution

Explanation of Solution

Operating cycle determines the average length of time taken from the initial cash to produce the item to the cash received from the customers. This includes various factors like payment terms and conditions a company gives its customers and the payment that the company receives from its suppliers.

Cash cycle is also known as cash conversion cycle. This is the time taken by the company to transfer its resources into cash. This involves cyclic effects from purchase of inventory to the amount recovered from the customers. The company’s position indicates positive when it has consistent cash and uses it in various companies’ activities.

b)

Summary Introduction

To discuss:

Increase in the inventory will affect the cash cycle of the firm, having remaining things, equal.

Introduction:

Cash cycle is also termed as cash conversion cycle that measures the time taken to convert the cash into stocks, accounts payable by the way of sales and accounts receivables and again back to cash.

b)

Expert Solution

Explanation of Solution

If the firm’s inventory increases, the inventory days will also increase, having other things to remain the same. This will lead to increase the cash cycle of the firm.

c)

Summary Introduction

To think critically: The impact on cash cycle if the firm gets discounts from its suppliers.

Introduction:

Cash cycle is also termed as cash conversion cycle that measures the time taken to convert the cash into stocks, accounts payable by the way of sales and accounts receivables and again back to cash.

c)

Expert Solution

Explanation of Solution

The impact on cash cycle is that if the firm gets discounts from its suppliers then the accounts payable days will automatically decrease and the rest remains the same. This will lead to the increase in the cash cycle of the firm.

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Students have asked these similar questions

Which one of the following statements is correct? A. If a firm decreases its inventory period, its accounts receivable period will also decrease. B. The longer the cash cycle, the more cash a firm typically has available to invest. C. A firm would prefer a negative cash cycle over a positive cash cycle. D. Decreasing the inventory period will also decrease the payables period. E. Both the operating cycle and the cash cycle must be positive values.

Your CFO tells you as finance manager that he feels much safer to have a larger inventory and cash level than before. What are trade-offs involved in the decision of how much inventory or cash the firm should carry. Answer for both inventory level and cash level separately

A large retailer such as Walmart possesses power over smaller suppliers. In theory, Walmart could force these suppliers to sell on payment terms that were well beyond a typical industry norm. How would this impact Walmart’s cash cycle? How would this impact the suppliers’ cycle? Are there any ethical issues involved in such a practice?

Answer 2

Question

Chapter 26, Problem 1P

a)

Summary Introduction

To discuss: The difference between operating cycle and cash cycle.

Introduction:

Cash cycle is also termed as cash conversion cycle that measures the time taken to convert the cash into stocks, accounts payable by the way of sales and accounts receivables and again back to cash.

a)

Expert Solution

Explanation of Solution

Operating cycle determines the average length of time taken from the initial cash to produce the item to the cash received from the customers. This includes various factors like payment terms and conditions a company gives its customers and the payment that the company receives from its suppliers.

Cash cycle is also known as cash conversion cycle. This is the time taken by the company to transfer its resources into cash. This involves cyclic effects from purchase of inventory to the amount recovered from the customers. The company’s position indicates positive when it has consistent cash and uses it in various companies’ activities.

b)

Summary Introduction

To discuss:

Increase in the inventory will affect the cash cycle of the firm, having remaining things, equal.

Introduction:

Cash cycle is also termed as cash conversion cycle that measures the time taken to convert the cash into stocks, accounts payable by the way of sales and accounts receivables and again back to cash.

b)

Expert Solution

Explanation of Solution

If the firm’s inventory increases, the inventory days will also increase, having other things to remain the same. This will lead to increase the cash cycle of the firm.

c)

Summary Introduction

To think critically: The impact on cash cycle if the firm gets discounts from its suppliers.

Introduction:

Cash cycle is also termed as cash conversion cycle that measures the time taken to convert the cash into stocks, accounts payable by the way of sales and accounts receivables and again back to cash.

c)

Expert Solution

Explanation of Solution

The impact on cash cycle is that if the firm gets discounts from its suppliers then the accounts payable days will automatically decrease and the rest remains the same. This will lead to the increase in the cash cycle of the firm.

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Answer 3

Question

Chapter 26, Problem 1P

a)

Summary Introduction

To discuss: The difference between operating cycle and cash cycle.

Introduction:

Cash cycle is also termed as cash conversion cycle that measures the time taken to convert the cash into stocks, accounts payable by the way of sales and accounts receivables and again back to cash.

a)

Expert Solution

Explanation of Solution

Operating cycle determines the average length of time taken from the initial cash to produce the item to the cash received from the customers. This includes various factors like payment terms and conditions a company gives its customers and the payment that the company receives from its suppliers.

Cash cycle is also known as cash conversion cycle. This is the time taken by the company to transfer its resources into cash. This involves cyclic effects from purchase of inventory to the amount recovered from the customers. The company’s position indicates positive when it has consistent cash and uses it in various companies’ activities.

b)

Summary Introduction

To discuss:

Increase in the inventory will affect the cash cycle of the firm, having remaining things, equal.

Introduction:

Cash cycle is also termed as cash conversion cycle that measures the time taken to convert the cash into stocks, accounts payable by the way of sales and accounts receivables and again back to cash.

b)

Expert Solution

Explanation of Solution

If the firm’s inventory increases, the inventory days will also increase, having other things to remain the same. This will lead to increase the cash cycle of the firm.

c)

Summary Introduction

To think critically: The impact on cash cycle if the firm gets discounts from its suppliers.

Introduction:

Cash cycle is also termed as cash conversion cycle that measures the time taken to convert the cash into stocks, accounts payable by the way of sales and accounts receivables and again back to cash.

c)

Expert Solution

Explanation of Solution

The impact on cash cycle is that if the firm gets discounts from its suppliers then the accounts payable days will automatically decrease and the rest remains the same. This will lead to the increase in the cash cycle of the firm.

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Answer 4

Question

Chapter 26, Problem 1P

a)

Summary Introduction

To discuss: The difference between operating cycle and cash cycle.

Introduction:

Cash cycle is also termed as cash conversion cycle that measures the time taken to convert the cash into stocks, accounts payable by the way of sales and accounts receivables and again back to cash.

a)

Expert Solution

Explanation of Solution

Operating cycle determines the average length of time taken from the initial cash to produce the item to the cash received from the customers. This includes various factors like payment terms and conditions a company gives its customers and the payment that the company receives from its suppliers.

Cash cycle is also known as cash conversion cycle. This is the time taken by the company to transfer its resources into cash. This involves cyclic effects from purchase of inventory to the amount recovered from the customers. The company’s position indicates positive when it has consistent cash and uses it in various companies’ activities.

b)

Summary Introduction

To discuss:

Increase in the inventory will affect the cash cycle of the firm, having remaining things, equal.

Introduction:

Cash cycle is also termed as cash conversion cycle that measures the time taken to convert the cash into stocks, accounts payable by the way of sales and accounts receivables and again back to cash.

b)

Expert Solution

Explanation of Solution

If the firm’s inventory increases, the inventory days will also increase, having other things to remain the same. This will lead to increase the cash cycle of the firm.

c)

Summary Introduction

To think critically: The impact on cash cycle if the firm gets discounts from its suppliers.

Introduction:

Cash cycle is also termed as cash conversion cycle that measures the time taken to convert the cash into stocks, accounts payable by the way of sales and accounts receivables and again back to cash.

c)

Expert Solution

Explanation of Solution

The impact on cash cycle is that if the firm gets discounts from its suppliers then the accounts payable days will automatically decrease and the rest remains the same. This will lead to the increase in the cash cycle of the firm.

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Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 5

Chapter 26, Problem 1P

a)

Summary Introduction

To discuss: The difference between operating cycle and cash cycle.

Introduction:

Cash cycle is also termed as cash conversion cycle that measures the time taken to convert the cash into stocks, accounts payable by the way of sales and accounts receivables and again back to cash.

a)

Expert Solution

Explanation of Solution

Operating cycle determines the average length of time taken from the initial cash to produce the item to the cash received from the customers. This includes various factors like payment terms and conditions a company gives its customers and the payment that the company receives from its suppliers.

Cash cycle is also known as cash conversion cycle. This is the time taken by the company to transfer its resources into cash. This involves cyclic effects from purchase of inventory to the amount recovered from the customers. The company’s position indicates positive when it has consistent cash and uses it in various companies’ activities.

b)

Summary Introduction

To discuss:

Increase in the inventory will affect the cash cycle of the firm, having remaining things, equal.

Introduction:

Cash cycle is also termed as cash conversion cycle that measures the time taken to convert the cash into stocks, accounts payable by the way of sales and accounts receivables and again back to cash.

b)

Expert Solution

Explanation of Solution

If the firm’s inventory increases, the inventory days will also increase, having other things to remain the same. This will lead to increase the cash cycle of the firm.

c)

Summary Introduction

To think critically: The impact on cash cycle if the firm gets discounts from its suppliers.

Introduction:

Cash cycle is also termed as cash conversion cycle that measures the time taken to convert the cash into stocks, accounts payable by the way of sales and accounts receivables and again back to cash.

c)

Expert Solution

Explanation of Solution

The impact on cash cycle is that if the firm gets discounts from its suppliers then the accounts payable days will automatically decrease and the rest remains the same. This will lead to the increase in the cash cycle of the firm.

Answer 6

Chapter 26, Problem 1P

a)

Summary Introduction

To discuss: The difference between operating cycle and cash cycle.

Introduction:

Cash cycle is also termed as cash conversion cycle that measures the time taken to convert the cash into stocks, accounts payable by the way of sales and accounts receivables and again back to cash.

a)

Expert Solution

Explanation of Solution

Operating cycle determines the average length of time taken from the initial cash to produce the item to the cash received from the customers. This includes various factors like payment terms and conditions a company gives its customers and the payment that the company receives from its suppliers.

Cash cycle is also known as cash conversion cycle. This is the time taken by the company to transfer its resources into cash. This involves cyclic effects from purchase of inventory to the amount recovered from the customers. The company’s position indicates positive when it has consistent cash and uses it in various companies’ activities.

Answer 7

Chapter 26, Problem 1P

a)

Summary Introduction

To discuss: The difference between operating cycle and cash cycle.

Introduction:

Cash cycle is also termed as cash conversion cycle that measures the time taken to convert the cash into stocks, accounts payable by the way of sales and accounts receivables and again back to cash.

Answer 8

a)

Expert Solution

Explanation of Solution

Operating cycle determines the average length of time taken from the initial cash to produce the item to the cash received from the customers. This includes various factors like payment terms and conditions a company gives its customers and the payment that the company receives from its suppliers.

Cash cycle is also known as cash conversion cycle. This is the time taken by the company to transfer its resources into cash. This involves cyclic effects from purchase of inventory to the amount recovered from the customers. The company’s position indicates positive when it has consistent cash and uses it in various companies’ activities.

Answer 9

a)

Expert Solution

Answer 10

a)

Expert Solution

Answer 11

Expert Solution

Answer 12

b)

Summary Introduction

To discuss:

Increase in the inventory will affect the cash cycle of the firm, having remaining things, equal.

Introduction:

Cash cycle is also termed as cash conversion cycle that measures the time taken to convert the cash into stocks, accounts payable by the way of sales and accounts receivables and again back to cash.

b)

Expert Solution

Explanation of Solution

If the firm’s inventory increases, the inventory days will also increase, having other things to remain the same. This will lead to increase the cash cycle of the firm.

Answer 13

b)

Summary Introduction

To discuss:

Increase in the inventory will affect the cash cycle of the firm, having remaining things, equal.

Introduction:

Cash cycle is also termed as cash conversion cycle that measures the time taken to convert the cash into stocks, accounts payable by the way of sales and accounts receivables and again back to cash.

Answer 14

b)

Expert Solution

Explanation of Solution

If the firm’s inventory increases, the inventory days will also increase, having other things to remain the same. This will lead to increase the cash cycle of the firm.

Answer 15

b)

Expert Solution

Answer 16

b)

Expert Solution

Answer 17

Expert Solution

Answer 18

c)

Summary Introduction

To think critically: The impact on cash cycle if the firm gets discounts from its suppliers.

Introduction:

Cash cycle is also termed as cash conversion cycle that measures the time taken to convert the cash into stocks, accounts payable by the way of sales and accounts receivables and again back to cash.

c)

Expert Solution

Explanation of Solution

The impact on cash cycle is that if the firm gets discounts from its suppliers then the accounts payable days will automatically decrease and the rest remains the same. This will lead to the increase in the cash cycle of the firm.

Answer 19

c)

Summary Introduction

To think critically: The impact on cash cycle if the firm gets discounts from its suppliers.

Introduction:

Cash cycle is also termed as cash conversion cycle that measures the time taken to convert the cash into stocks, accounts payable by the way of sales and accounts receivables and again back to cash.

Answer 20

c)

Expert Solution

Explanation of Solution

The impact on cash cycle is that if the firm gets discounts from its suppliers then the accounts payable days will automatically decrease and the rest remains the same. This will lead to the increase in the cash cycle of the firm.