Author Question: List and discuss the ratios that make up the calculation of the cash conversion cycle. What will ... (Read 21 times)

skymedlock

  • Hero Member
  • *****
  • Posts: 561
List and discuss the ratios that make up the calculation of the cash conversion cycle.
 
  What will be an ideal response?

Question 2

A Form W-3 must be submitted to the Social Security Administration by February 28, following the end of the calendar year.
  Indicate whether the statement is true or false



cassie_ragen

  • Sr. Member
  • ****
  • Posts: 347
Answer to Question 1

The average collection period of accounts receivable is the average number of days required to convert receivables into cash. The average collection period helps gauge the liquidity of accounts receivable, the ability of the firm to collect from customers. It may also provide information about a company's credit policies.
The days inventory held is the average number of days it takes to sell inventory to customers. This ratio measures the efficiency of the firm in managing its inventory. Generally, a low number of days inventory held is a sign of efficient management; the faster inventory sells, the fewer funds tied up in inventory. On the other hand, too low a number could indicate understocking and lost orders, a decrease in prices, a shortage of materials, or more sales than planned. A high number of days inventory held could be the result of carrying too much inventory or stocking inventory that is obsolete, slow-moving, or inferior; however, there may be legitimate reasons to stockpile inventory, such as increased demand, expansion and opening of new retail stores, or an expected strike. The type of industry is important in assessing days inventory held. It is expected that florists and produce retailers would have a relatively low days inventory held because they deal in perishable products, whereas retailers of jewelry or farm equipment would have higher days inventory held, but higher profit margins.
The days payable outstanding is the average number of days it takes to pay payables in cash. This ratio offers insight into a firm's pattern of payments to suppliers. Delaying payment of payables as long as possible is desirable because the firm can earn a return on cash held.

Answer to Question 2

T



Related Topics

Need homework help now?

Ask unlimited questions for free

Ask a Question
 

Did you know?

Acetaminophen (Tylenol) in overdose can seriously damage the liver. It should never be taken by people who use alcohol heavily; it can result in severe liver damage and even a condition requiring a liver transplant.

Did you know?

The longest a person has survived after a heart transplant is 24 years.

Did you know?

Despite claims by manufacturers, the supplement known as Ginkgo biloba was shown in a study of more than 3,000 participants to be ineffective in reducing development of dementia and Alzheimer’s disease in older people.

Did you know?

Ether was used widely for surgeries but became less popular because of its flammability and its tendency to cause vomiting. In England, it was quickly replaced by chloroform, but this agent caused many deaths and lost popularity.

Did you know?

The use of salicylates dates back 2,500 years to Hippocrates's recommendation of willow bark (from which a salicylate is derived) as an aid to the pains of childbirth. However, overdosage of salicylates can harm body fluids, electrolytes, the CNS, the GI tract, the ears, the lungs, the blood, the liver, and the kidneys and cause coma or death.

For a complete list of videos, visit our video library