Anchors Resource Sdn Bhd has the following data:

RM

Annual sales20,000,000

Costs of goods sold12,000,000

Inventory 5,095,890

Account Receivable3,287,672

Account Payable 2,400,000

Assuming that the firms is operating days is 360. You are required:

a.Compute the firms' inventory turnover. (2 marks)

Inventory turnover= COGS/ Inventory

= 12,000,000/ 5,095,890

= 2.35 time

b.Compute the firms' account receivable turnover. (2 marks)

Account receivable turnover= Sales/ Account Receivable

= 20,000,000/ 3,287,672

= 6.08 time

c.Compute the firm's cash conversion cycle. (6 marks)

Cash conversion cycle = OC - APP

= (AAI + ACP) - APP

= (360/2.35) + (360/ 6.08) - [2,400,000/ (12,000,000/ 360)]

= 153.19 + 59.21 - 72

= 140.40

Explain the methods of managing the cash conversion cycle.