[amaffei]

AR = 40 Million
Inventory = 2.6 Million
AP = 3.7 Million
Sales = 50 Million
COGS = 45 Million

Whats cash conversion cycle based on 365 day year.

[GinjaNinja]

The formulas are as follows:
CCC = AR Collection Period + Inventory Conversion Period – Payables Deferral Period
AR Collection Period = 365/AR Turnover Ratio –> AR Turnover Ratio = Net credit sales/Avg AR
Inventory Conversion Period = 365/Inventory Turnover Ratio –> Inventory Turnover Ratio = COGS/Avg Inventory
Payables Deferral Period = 365/AP Turnover Ratio –> AP Turnover Ratio = COGS/Avg AP

To solve:
AR Collection Period = 365/(50,000,000/40,000,000) = 292
Inventory Conversion Period = 365/(45,000,000/2,600,000) = 21.1
Payables Deferral Period = 365/(45,000,000/3,700,000) = 30.0
CCC = 292 + 21.1 – 30.0 = 283.1

FAR: 79 (7/25/16)
AUD: 89 (10/3/16)
REG: 69 (1/9/17); 83 (8/21/17)
BEC: 74 (3/6/17); 90 (5/31/17)

 

[amaffei]

thank you ginjaninja – i think you are going to do great on your retake for sure – thanks for your help

[GinjaNinja]

No problem amaffei….and thanks! I sure hope so! Good luck on your exam!

FAR: 79 (7/25/16)
AUD: 89 (10/3/16)
REG: 69 (1/9/17); 83 (8/21/17)
BEC: 74 (3/6/17); 90 (5/31/17)

 

[amaffei]

Answer to questions states 20.3 days for CCC – anyone can figure that out

[GinjaNinja]

amaffei – The answer would be 20.3 if AR was 4 million. I am thinking you may have accidently entered 40 million instead of 4 million for AR in your original post.

To solve:
AR Collection Period = 365/(50,000,000/4,000,000) = 29.2
CCC = 29.2 + 21.1 – 30.0 = 20.3

FAR: 79 (7/25/16)
AUD: 89 (10/3/16)
REG: 69 (1/9/17); 83 (8/21/17)
BEC: 74 (3/6/17); 90 (5/31/17)

 

[amaffei]

thanks ginja ninja – you are 100% correct i did a typo – i see on your signature you are taking bec today – good luck with it – if you can give us your bec exam experience that would be cool since you do have the before and after experience – good luck

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