Homework Answers
Cash conversion cycle is time taken by the company to convert it's investments in inventory to cash
Formula for cash conversion cycle is
Inventory holding period + no of days debtors pays - no of days payment made to suppliers
so cash conversion cycle is = 69+29-39= 59 days
If the company can delay it's payment to suppliers from 39 days to 59 days cash conversion cycle will be reduced by 20 days that is to 39 days
Savings in working capital investment because of delay in payment is
20 × 2000 × 60= 2400000
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