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Cash Conversion Cycle

The document provides financial statement data to calculate key metrics for managing a company's cash conversion cycle. It includes annual sales on credit, cost of goods sold, average inventory, accounts receivable, and accounts payable. From this data, one can determine: 1) Days Inventory Outstanding which measures how long inventory is held, 2) Days Sales Outstanding which measures how quickly customers pay, and 3) Days Payable Outstanding which measures how quickly suppliers are paid, as well as 4) the overall Cash Conversion Cycle which evaluates the average time between paying for materials and collecting from customers.

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Arthur Aquino
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52 views2 pages

Cash Conversion Cycle

The document provides financial statement data to calculate key metrics for managing a company's cash conversion cycle. It includes annual sales on credit, cost of goods sold, average inventory, accounts receivable, and accounts payable. From this data, one can determine: 1) Days Inventory Outstanding which measures how long inventory is held, 2) Days Sales Outstanding which measures how quickly customers pay, and 3) Days Payable Outstanding which measures how quickly suppliers are paid, as well as 4) the overall Cash Conversion Cycle which evaluates the average time between paying for materials and collecting from customers.

Uploaded by

Arthur Aquino
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as XLSX, PDF, TXT or read online on Scribd
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Cash Conversion Cycle. Show your complete solution.

Calculating the CCC from the Financial Statement


The following data are taken from the financial statement:
Annual Sales ( on Credit ) P 1,216,666
Cost of Goods Sold P 1, 013,889
Average Inventory P 250,000
Average Accounts Receivable P 300,000
Average Accounts Payable P 150,000

COMPUTE FOR THE FOLLOWING and interpret your answer:

·1. DIO stands for Days Inventory Outstanding

·2. DSO stands for Days Sales Outstanding

·3. DPO stands for Days Payable Outstanding

4.CASH CONVERSION CYCLE


3,889
000

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