From the Ahold balance and profit & loss sheets over a certain year, the following data are retrieved.

This year's sales = 32,500 GBP

Cost of goods sold = 22,995 GBP

Inventories January 1 = 1,500 GBP

Inventories December 31 = 1,450 GBP

Accounts Receivable January 1 = 793 GBP

Accounts Receivable December 31 = 665 GBP

Accounts payable January 1 = 550 GBP

Accounts payable December 31 = 520 GBP

Based on this data, calculate

1. the Operating Cycle (5 marks)

2. the Cash Conversion Cycle (5 marks)

Recently Ahold has decided unilaterally to extend its payment terms to the suppliers by 30 days. Explain in simple terms what effect this has on the

3. Operating Cycle (5 marks)

4. Cash Conversion Cycle (5 marks)

5. Suppose Ahold starts a reverse factoring program for its suppliers. What will the typical effect be on

the cash conversion cycle of Ahold (5 marks)

the cash conversion cycle of Ahold's suppliers (4 marks)

Answer rating: 100% (QA)

The Operating Cycle The Operating Cycle measures the average number of days it takes for a company to convert its inventory into cash It can be calculated using the formula Operating Cycle Average Inv... View the full answer