| | MEASURING WORKING CAPITAL EFFICIENCY |
| | | | CASH CONVERSION CYCLE |
| | A Popular Method for Evaluating a Firm's Effective Management of its Working Capital |
| | Takes the Approach that the Firm's Objective Should Be to Minimize Working Capital |
| | Subject to the Constraint That it has Sufficient Working Capital to Support the Firm's Operations. |
| | Minimizing Working Capital is Accomplished by Speeding Up the Collection of Cash from Sales, |
| | Increasing Inventory Turns, and Slowing Down the Disbursement of Cash. |
| | The Cash Conversion Cycle Incorporates All of These Factors in a Single Measure. |
| | The model below calculates the Cash Conversion Cycle using indicators obtained from |
| | a company's financial statements - Total Sales, Total Inventory, Accounts Receivable, Cost of Goods |
| | Sold and ccounts Payable. Insert these amounts, for the past 3 years, in the yellow-coded cells |
| | and the model calculates the Cash Conversion Cycle for each of the past 3 years. |
| | | | | | ENTER DATA IN YELLOW-CODED CELLS ONLY |
| | | | Current Year | 2014 | 2013 | 2012 |
| | | | Accounts Receivable | $6.7 | $6.7 | $6.7 |
| | | | Inventories | $3.1 | $3.1 | $3.1 |
| | | | Accounts Payable | $5.1 | $5.1 | $5.1 |
| | | | Total Sales or Revenues | $66.7 | $66.7 | $66.7 |
| | | | COGS or Cost of Revenue | $30.9 | $30.9 | $30.9 |
| | | CALCULATE CCC USING FINANCIAL STATEMENT DATA |
| | Most Recent Year | | | 2014 | CURRENT YEAR |
| | Total Sales | | | $66.7 | Average Collection Period | | | | 36.7 |
| | COGS or Cost of Revenue | | | $30.9 | Inventory Conversion Period | | | | 36.6 |
| | Total Inventory | | | $3.1 | Payables Deferral Period | | | | 60.2 |
| | Accounts Receivable | | | $6.7 |
| | Accounts Payable | | | $5.1 | Cash Conversion Cycle (Days) | | | | 13.0 | CCC |
| | | | | 2013 | LAST YEAR |
| | Total Sales | | | $66.7 | Average Collection Period | | | | 36.7 |
| | COGS or Cost of Revenue | | | $30.9 | Inventory Conversion Period | | | | 36.6 |
| | Total Inventory | | | $3.1 | Payables Deferral Period | | | | 60.2 |
| | Accounts Receivable | | | $6.7 |
| | Accounts Payable | | | $5.1 | Cash Conversion Cycle (Days) | | | | 13.0 | CCC |
| | | | | 2012 | TWO YEARS AGO |
| | Total Sales | | | $66.7 | Average Collection Period | | | | 36.7 |
| | COGS or Cost of Revenue | | | $30.9 | Inventory Conversion Period | | | | 36.6 |
| | Total Inventory | | | $3.1 | Payables Deferral Period | | | | 60.2 |
| | Accounts Receivable | | | $6.7 |
| | Accounts Payable | | | $5.1 | Cash Conversion Cycle (Days) | | | | 13.0 | CCC |
pmcclam1982
cash_conversion_cycle__030615.xls
