Hollingsworth Candy Products has an inventory turnover of six times per year, a receivables turnover of 10
Question:
Cash Conversion Cycle
Cash conversion cycle measures the total time a business takes to convert its cash on hand to produce, pay its suppliers, sell to its customers and collect cash from its customers. The process starts with purchasing of raw materials from suppliers,...
Step by Step Answer:
Cash Conversion Cycle Inventory Conversion Period Receivables Collection Period Payables Deferr...View the full answer
Business Logistics Supply Chain Management
ISBN: 978-0130661845
5th edition
Authors: Ronald H. Ballou
Related Video
Inventory turnover is a key metric that helps businesses evaluate the efficiency of their operations. A high turnover ratio is generally considered positive, indicating that the company is effectively selling its inventory and making efficient use of its resources. On the other hand, a low turnover ratio may indicate issues such as overstocking or slow sales and may require further examination to identify and address the underlying causes. Businesses use this ratio to make decisions about inventory levels, production schedules, and pricing strategies. It also helps businesses to identify areas where they may need to make improvements, such as reducing lead times for production or optimizing sales and marketing efforts. Additionally, inventory turnover is used by investors and analysts as a key performance indicator to evaluate the financial health and growth potential of a company.
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