Balloon Payment Financial (BPF) has an inventory conversion period of 45 days, a receivables collection period of
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Balloon Payment Financial (BPF) has an inventory conversion period of 45 days, a receivables collection period of 30 days, and a payables deferral period of 20 days.
(a) What is the length of the firm’s cash conversion cycle?
(b) If BPF’s annual sales are $1.8 million and all sales are on credit, what is the average balance in accounts receivable?
(c) How many times per year does BPF turn over its inventory?
(d) What would happen to BPF’s cash conversion cycle if, on average, inventories could be turned over 12 times a year?
Cash Conversion CycleCash 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,...
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