4. Ca conversion cycle Aa Cash management is a very important function of managers. Companies need to manage their operations in a way that they can sustain growth and yet not run out of cash. Consider the case of Black Sheep Broadcasting Company Black Sheep Broadcasting Company is a mature firm that has a stable row of business. The following data was taken from its financial statements last year: Cost of goods sold Inventory Accounts receivable Accounts payable $9.500.000 $6.650,000 $2.900. $1,900.000 $200.000 Back Sheep Broadcasting din determining the length of funds t o g el Use the information in the preceding table to complete the following table (Note: e365days as the length of year in a clowns, and round all value to two decal places.) Value Inventory Conversion Period Average collection period Payables Deferral Period Cash Conversion de Both the inventory conversion period and payables deferral period use the average daily COGS in their denominators, whereas the average collection period uses average daily sales in its denominator. Why do these measures use different inputs? Inventory and accounts payable are carried at cost on the balance sheet, whereas accounts receivable are recorded at the price which goods are sold. Current assets should be divided by sales, but current l e s should be divided by the COGS Is there generally a positive or negative relationship between networking capital and the cash conversion cyde?( other words, if a firm has a high level of networking capitalistiky to have a high or low cash conversion de There is a negative relationship between not working capital and the cash conversion cyde There is a positive relationship between networking capital and the cash conversion de ted to The management Back Sheep Broadcasting Company wants to continues internal discussor management. One of the race team members presents the following case to his cohorts Which of the following u ses to the Case in Discussion Loud Reco r ations The Conos c ut the amount of time the company has to pay is supplies General, there is a length of time between the purchase ma a nd labor and the payment of cash for them. The can reduce the The company's management expect that it products and 50 days to receive payment from its customers, Loud Noe's CFO has told the rest of the management team that they should expect the length of the bank loans to be approximately 110 days amount of time The CFO's approximation of the length of the bank loans should be accurate, company to manufacture, well and collect occur for the company to be able to pay its loans from the bank