Answer to Question #126754 in Economics for Kgothatso

Question

Aztec Products wishes to evaluate its cash conversion cycle (CCC). Research by one of the
firm’s financial analysts indicates that on average the firm holds items in inventory for 65
days, pays its suppliers 35 days after purchase, and collects its receivables after 55 days.
The firm’s annual sales (all on credit) are about R2.1 billion, its cost of goods sold represent
about 67 percent of sales, and purchases represent about 40 percent of cost of goods sold.
Assume a 365-day year.
3.1 (7 points) What is Aztec Products’ cash conversion (CCC)?
3.2 (3 points) If Aztec could shorten its CCC by 5 days, would it be best to reduce the
inventory holding period, reduce the receivable collection period, or extend the
accounts payable period? Why?
3.3 (3 points) How should the firm manage its inventory, accounts receivable, and
accounts payable in order to reduce the length of its cash conversion cycle?

Answer 1

Dear Kgothatso, your question requires a lot of work, which neither of our experts is ready to perform for free. We advise you to convert it to a fully qualified order and we will try to help you. Please click the link below to proceed: Submit order