Cash conversion cycle-working capital management

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Reference no: EM1348625

1. What is the significance to working capital management of matching sales and production? What is the significance to working capital management of matching payables with receivables?

2. By using long-term financing to partially fund current assets, a company may have less risk but lower profits than a firm with a normal financing plan, i.e. matching A/R = 1.5 x A/P. Explain what a "normal financing plan" is and the significance of financing working capital while maintaining appropriate current asset ratios.

3. Answer the following problem and show the calculation: What is the cash conversion cycle for a company with a receivables period averaging 40 days, a payables period averaging 30 days, and an inventory period averaging 60 days?

Reference no: EM1348625

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