All figures in millions Amazon Nordstrom Sales 75000 12000

All figures in

$ millions

Amazon

Nordstrom

Sales

75,000

12,000

COGS

56,000

7,000

Receivables

5,000

2,000

Payables

22,400

1,200

Inventory

7,000

1,400

How can I get Cash to Cash (C2C)?

Solution

Cash to Cash Cycle means the funds available for use in financing the day-to-day activities of a business.

The formula for calculating C2C is - Days Cash Locked up as inventory + Days Cash Locked up in Receivables - Days Cash free as the business has not paid bills.

FOR AMAZON

Days Cash Locked up as Inventory = Inventory / COGS = 7000 / 56000 = 0.125

Days Cash Locked up as Receivables = Receivables / Sales = 5000 / 75000 = 0.067

Days Cash free as the business has not paid bills = Payables / COGS = 22400 / 56000 = 0.400

Therefore C2C for Amazon = 0.125+0.067-0.400 = (0.208)

FOR NORDSTORM

Days Cash Locked up as Inventory = Inventory / COGS = 1400 / 7000 = 0.200

Days Cash Locked up as Receivables = Receivables / Sales = 2000 / 12000 = 0.167

Days Cash free as the business has not paid bills = Payables / COGS = 1200 / 7000 = 0.171

Therefore C2C for Nordstorm = 0.200+0.167-0.171 = 0/196