5. Cash conversion cycle Aa Aa E 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 the Extensive Enterprise Inc.: Extensive Enterprise Inc. has forecasted sales of $24,000,000 for next year and expects its cost of goods sold (COGS) to remain at 80% of sales. Currently, the firm holds $2,900,000 in inventories, $2,200,000 in accounts receivable, and $2,700,000 in accounts payable. Approximately how long does it take Extensive Enterprise to convert its raw materials to its finished products and then to sell those goods? (Note: In all calculations, assume that there are 365 days in a year.) O 49.62 days 60.64 days O 55.13 days 57.89 days On average, it takes from the time a sale is made until the time cash is collected from customers. Extensive Enterprise relies on customer credit when it buys raw materials from its suppliers. On average, it takes after the firm purchases materials before it sends cash to its suppliers. What is the length of Extensive Enterprise's cash conversion cycle (CCC)? 39.12 days 37.26 days 60.64 days 55.13 days 57.89 days On average, it takes from the time a sale is made until the time cash is collected from customers. 28.44 days 30.11 days 38.48 days Extensive Enterprise 33.46 days her credit when it buys raw materials from its suppliers. On average, it takes after the firm purchases materials before it sends cash to its suppliers. What is the length of Extensive Enterprise's cash conversion cycle (CCC)? O 39.12 days 37.26 days O 35.40 days 40.99 days The management at Extensive Enterprise wants to continue its internal discussions regarding its cash management. One of the finance team members presents the following case to her cohorts: Case in Discussion Which of the following responses to the CFO's statement is most accurate? The CFO's approximation of the length of the bank loans should be accurate, because it will take 90 days for the company to manufacture, sell, and collect Teal Monkey Manufacturers's management plans to finance its operations with bank 0 60.64 days 55.13 days 57.89 days O On average, it takes from the time a sale is made until the time cash is collected from customers. Extensive Enterprise relies on customer credit when it buys raw materials from its suppliers. On average, it ta after the firm purchases materials before it sends cash to its suppliers. 43.63 days 48.76 days 53.90 days bth of Extensive Enterprise's cash conversion cycle (CCC)? 39.12 days O 37.26 days O 35.40 days 0 40.99 days The management at Extensive Enterprise wants to continue its internal discussions regarding its cash management. One of the finance team members presents the following case to her cohorts: Case in Discussion Which of the following responses to the CFO's statement is most accurate? The CFO's approximation of the length of the bank loans should be accurate, The management at Extensive Enterprise wants to continue its internal discussions regarding its cash management. One of the finance team members presents the following case to her cohorts: Which of the following responses to the CFO's statement is most accurate? Case in Discussion Teal Monkey Manufacturers's management plans to finance its operations with bank loans that will be repaid as soon as cash is available. The company's management expects that it will take 50 days to manufacture and sell its products and 40 days to receive payment from its customers. Teal Monkey Manufacturers's CFO has told the rest of the management team that they should expect the length of the bank loans to be approximately 90 days. The CFO's approximation of the length of the bank loans should be accurate, because it will take 90 days for the company to manufacture, sell, and collect cash for its goods. All these things must occur for the company to be able to repay its loans from the bank. The CFO is not taking into account the amount of time the company has to pay its suppliers. Generally, there is a certain length of time between the purchase of materials and labor and the payment of cash for them. The CFO can reduce the estimated length of the bank loan by this amount of time. Is it possible for a firm to have a negative CCC? O Yes