Verbrugge Corporation is a leading U.S. producer of automobile batteries.

Verbrugge Corporation is a leading U.S. producer of automobile batteries. Verbrugge turns out 1,500 batteries per day at a cost of $6 per battery for materials and labor. It takes the firm 22 days to convert raw materials into a battery. Verbrugge allows its customers 40 days in which to pay for the batteries, and the firm generally pays its suppliers in 30 days.
a. What is the length of Verbrugge’s cash conversion cycle?
b. If Verbrugge always produces and sells 1,500 batteries per day, what amount of working capital must it finance?
c. By what amount could Verbrugge reduce its working capital financing needs if it was able to stretch its payables deferral period to 35 days?

Cash Conversion Cycle
Cash 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,...
Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may...

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