Payable days: The number of days that it takes for a company to pay off a debt to another business
* Goodfoods payable days stay relatively the same (around 70 days) for the first three years, but then shoots up to 100 in the last year.
* This increase is the result of an increase of Goodfoods inventory
* By purchasing more inventories, this ties up more of Goodfoods cash flows, causing them to take more days to pay their accounts payable account.
Cash Conversion Cycle - A measurement that is expressed as a length of time, in days.
* It conveys the time it takes for a company to convert into cash flows.
* This cycle essentially measures the amount of time that it takes for each dollar invested into the sale process takes to be converted into cash
* This number can be found using the following formula:
CCC= (Receivable days + Inventory days) – Payable days
CCC= (21.12+140.08) – 100.22
* This means that in 1987 it takes an average of 60.98 days for Goodfood to turn their inputs into cash flows
* This cycle is very important to Goodfoods’ as it displays how quickly they can move their products, and generate cash though sales
* If Goodfood is managing their cash flows in an efficient manor, than the lower this number will be
* The shorter the cycle is, the less time Goodfoods, investment is locked up in the business procedure,
* Furthermore the smaller the cycle, the more it improves the companies’ bottom line.