C.xls

15Chaptermodel2/16/200612:472/16/(1)thecashconversioncycleand(2)():(1)Theinventoryconversionperiod,whichistheaveragetimerequiredtoconvertmaterialsintofinishedgoodsandthentosellthosegoods.(2)Thereceivablescollectionperiod,whichisthelengthoftimerequiredtoconvertthefirm'sreceivablesintocash,orhowlongittakestocollectcashfromasale.(3)Thepayablesdeferralperiod,:Cashconversioncycle=Inventoryconversionperiod+Receivablescollectionperiod−$1,216,666andcostsofgoodssoldare$1,013,889,whileinventoriesare$250,000,accountsreceivableare$300,000,andpayablesare$150,-dayyear,.Sales$1,216,666COGS$1,013,889Inventories$250,000AR$300,000AP$150,000Days/=ICP+RCP−PDP=Inv/(COGS/365)+AR/(Sales/365)−AP/(COGS/365)=90+90−54=,,