Verbrugge Corporation is a leading U.S. producer of automobile batteries. Verbrugge turns out 1,500 batteries per day at a cost of $6 per battery for materials and labor. It takes the firm 22 days to convert raw materials into a battery. Verbrugge allows its customers 40 days in which to pay for the batteries, and the firm generally pays its suppliers in 30 days.
a. What is the length of Verbrugge’s cash conversion cycle?
b. If Verbrugge always produces and sells 1,500 batteries per day, what amount of working capital must it finance?
c. By what amount could Verbrugge reduce its working capital financing needs if it was able to stretch its payables deferral period to 35 days?

  • CreatedNovember 24, 2014
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