Pressy Essay

254 WordsJan 31, 20142 Pages
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 EX: 1987 CCC= (21.12+140.08) – 100.22 = 60.98 * 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

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