XYZ Company has issued the following financial data for 2007

XYZ Company has issued the following financial data for 2007: Revenue (billions) 66.6 CGS (billions) 48.5 Average Inventory Value (billions) 1.11 Average Accts. Receivable (billions) 6.02 Accounts Payable (billions) 8 What is the cash to conversion cycle for 2007? (nearest whole number)

Solution

Cash to conversion Cycle = DIO + DPO - DSO

DIO = Average Inventory/(COGS/day) = 8.53 days

DSO = Average AR / Revenue per day = 6.02/(66.6/365) = 32.99 days

DPO = Average AP/COGS per day = 8/(48.5/365) = 60.206 days

Hence Cash to conversion cycle = 60.206 days + 8.53 days - 32.99 days = 35.746 days

Hence nearest whole number is equal to 36 days