by Aravind Barla – Saturday, 13 February 2021, 4:11 PM
Number of replies: 2
The cash conversion cycle is a form of metric that is used for the metric that will
measure the time as it will take for the company to be able to measure the inventory
and other kinds of resources into the cash flow as it is seen to be from the sales. This is
also called as the net operating cycle. In this the CC is seen to measure about the ways
in which the metric is taken into account and about the time which the company will
need its inventory. The CCC is considered to be based on the quantitative measure that
is used for the evaluation of the efficiency of the company’s operation and the
management. This is a form of decreasing CCC or used for the steady CCC. This is
important for the people to be able to bear in mind that the CCC is seen to be applied
only to the selected dependent on these inventory management and these related
operations (Wang, 2019).
The formula for the CCC is that it is derived for the calculation of the net aggregate time
which needs to be involved for the 3 stages of the cash conversion lifecycle.
Cash budget is considered to be a part of the budget or it is considered to be a part of
the cash receipt and also the disbursement during the period. These cash inflow as it is
used for the inflow and also the outflow that is used for the revenue collected and also
the expenses need to be pay in this element.
For example, assuming A is a part of the clothing manufacturing shoes and it is
estimated that the cost of the clothes will be $100,000 in sales for the month of June,
July and August. It can be considered to be a part of the 50$ per pair/ In this the
company can estimate the sales of 1000 pairs of products each month. If the A forecast
indicates that 80% of these cash will come from the sales which will be collected in the
month which is derived following the sales and the other 20% will be collected two
months in the following of the sales. In this the start of the cash balance for July will be
forecasted for the 20,000 and there is the cash budget which will assumed that 80% of
the June sales will be collected from July. This is seen to become 80,000 as it is about
the projection of the cashflows. In this there is the 100,000 in cash inflow from the sales
that is made earlier (Chang, 2018). It can be stated that the computation of the cash
inflow will be the main receivable in the start of the July and it will be a part of the
starting balance. In this case the company will subtraction of the cash that is needed for
the pay in productsion and other kinds of expenses. In this the total of $260,000 will be
seen. A seen to be having aending cash balance which is combination of the cash
inflow and cash outflow.
Chang, C. C. (2018). Cash conversion cycle and corporate performance: Global
evidence. International Review of Economics & Finance, 56, 568-581.
Wang, B. (2019). The cash conversion cycle spread. Journal of financial
economics, 133(2), 472-497.
Ramakrishna Ganga – Saturday, 13 February 2021, 4:43 PM
Number of replies: 1
Cash conversion cycle,
Cash conversion cycle is a form of several measures of management effectiveness. It is
about the ways in which the company will be able to convert the cash. In these cases
the first converted into the inventory and also the accounts payable which is through the
sales and also the accounts receivable. It is then seen to move back into cash. There is
the main combination that needs to be with the metrics. The cash conversion cycle is
often considered to be the one with the better management. CCC is a combination of
the different kinds of activity ratios that is seen to be involving accounts receivable,
accounts payable and also the inventory turnover. The AR and also the inventory are
deemed to be the shorter-term assets where the AP is a form of liability as these ratios
are found on the balance sheet. In these cases the ratios is about the effective and
efficient management that is used for the shorter term assets and also the liabilities for
the generation of the cash (Wang, 2021).
The cash budget is considered to be an estimation of the cash flow of the business that
is seen to function over a specific period of time. These can be changed for the weekly,
monthly and also the annual budget (Muneer, Ahmad, & Ali, 2017). These budgets are
seen to assess about the entity which has the sufficient cash for the continuing
operating over these given time frame.
Cash budget is seen to be based on the company’s estimation of the cash inflows and
also the outflows over these specific period of time. The company is seen to use these
cash budget as it is used for the determination about the sufficient cash for the
continuing of the operations in these given time frame. The cash budget is also seen for
the providing of the company with these insights with these cash needs that needs to be
used for the determination of the efficient use of cash. These cash budgets can be
viewed for the shorter term cash budget and it is based on the time frame of weeks to
months (Figueroa & Leukhina, 2018). The company needs to be able to manage the
sales and also the expenses to be able to reach these optimal level of cash flows.
Figueroa, N., & Leukhina, O. (2018). Cash flows and credit cycles. Journal of Banking &
Finance, 87, 318-332.
Muneer, S., Ahmad, R. A., & Ali, A. (2017). Impact of financial management practices
on SMEs profitability with moderating role of agency cost. Information Management and
Business Review, 9(1), 23-30.
Wang, H. (2021, January). Research on Financial Strategy Based on Cash Flow. In 6th
Annual International Conference on Social Science and Contemporary Humanity
Development (SSCHD 2020) (pp. 800-805). Atlantis Press.
Manisha Annam – Tuesday, 9 February 2021, 2:54 PM
Number of replies: 3
The Cash Conversion Cycle
The quantity of time it will take for the inventory to offer the products or shares
and get the cash or the proper time when cash can be acquired may be the cash
conversion cycle. The dimension is completed to evaluate the cash flows and spend the
amounts or have the quantities. The cash conversion cycle should not be good for the
effective and company that is lucrative. A confident cash conversion cycle ensures that
a business’s dimension of this time it will take to pay for the suppliers or vendors it takes
for the inventory to get quantity is higher than the time. Some businesses have cash
that is negative period due to their business models, and it prefers them. Organizations
after cash models are apt to have an adverse cash conversion cycle to make effective
decisions and assist them to assemble inventories prompt and spend the total amount
because it assists. Inventory turns into a burden if it’s perhaps not offered timely.
Organizations simply take maximum time to pay for the companies so they really have
actually they can have maximum advantages of the cash. The businesses tend to get
repayments quickly as it will help them to enjoy a smooth and cash that is lucrative (Bert
Credit policies can be an aspect that is essential to capital management. It really
is employed to enhance product sales for the business. This involves a framework that
is obvious to assist in producing extra sales. The sort of credit policy that can help your
company to generate extra sales and finally more earnings is dependent upon the type
of the business. The type associated with the continuing business governs the terms
and conditions of credit policies. Then, the terms and conditions need to be placed on
the client base efficiently and definitely to assist them in almost every means that is
achievable. Informed decision making is improved whenever beneficial credit is
manufactured and used. One variety of credit policy is really a credit that is liberal that
can help to improve product sales as customers get yourself a possibility to purchase
more with less investing. This might bring about unpaid debts which could cripple the
financial management of the business. therefore, using a credit that is liberal isn’t useful
in every situation. Terms and conditions should be made and used to attenuate the risks
of improved debts being unpaid to the client. Although this credit policy increases client
loyalty and individuals have drawn to the ongoing company, however, it must certainly
be taken into account that the business should never face loss due to the credit policies
(Pat O’Connor, 2021).
Bert Markgraf (2021). Advantages & Disadvantages of a Liberal Credit Policy. Retrieved
February 8, 2021, from https://smallbusiness.chron.com/advantages-disadvantagesliberal-credit-policy-63743.html.
Pat O’Connor (2021). What Are the Benefits of a Positive Cash Conversion Cycle?
Retrieved February 8, 2021, from https://smallbusiness.chron.com/benefits-positivecash-conversion-cycle-37887.html.
Meghana Reddy Bokka – Friday, 12 February 2021, 7:17 PM
Number of replies: 3
The working capital management will be consolidated up with the other association for a
significant stretch before it changed over into money. On an account of the executive’s
bookkeeping, the time taken between an association’s disseminating and gathering
money is alluded to as the money change cycle. Besides, it is one of the real
proportions of the executive’s adequacy. According to the money transformation cycle
estimates how much a firm develops quickly and how be convert contributed money
from speculation to returns. Here, it can’t be legitimately found in incomes, because
these are additionally influenced by the financing and speculation frameworks Inventory
the board is pursued intently by another factor that influences the working capital, and
that is the credit approach (Xuan, 2019).
A business can have extremely perfect stock management yet neglect to have a good
credit approach. The measure of money accessible should coordinate the deals made
in any business. In numerous cases, the credit reached out to customers outperforms
the measure of money got, in this way getting a few issues the monetary commitment.
Indebted individuals may baffle the business by neglecting to pay back on the stipulated
time, leaving the organization in a money related deficiency. A lot of credit ruins the
working capital as the business can’t play out its everyday activities because of the
absence of willing providers because of proceeded with late installments (Abdulla,
2018). A business can change the credit strategy to ensure that customers are just
given credit dependent on their past record as a consumer and at a specific add up to
abstain from overselling using a loan. The strategy ought to be made in full
acknowledgment that the business has repetitive money related needs that must be
met. Therefore, the credit time span ought to likewise suit the money related needs of
the organization to evade postponed installment that denies the matter of working
capital, one of its most valuable assets is the stock of an organization. The sources of
info and complete results of an organization are the substance of its organization in
retail, generation, sustenance management, and other stock escalated ventures. A lack
of stock can be incredibly adverse when and where it is required. At the same time,
stock can be viewed as a risk. A huge stock conveys the danger of deterioration,
burglary, harm, or moves sought after. Stock must be safeguarded, and if it isn’t sold in
time it might need to be discarded at freedom costs (Hassan, 2020).
Hussain, S., & Hassan, A. A. G. (2020). The Reflection of Exchange Rate Exposure and
Working Capital Management on Manufacturing Firms of Pakistan. Talent Development
& Excellence, 12(2).
Masri, H., & Abdulla, Y. (2018). A multiple objective stochastic programming model for
working capital management. Technological Forecasting and Social Change, 131, 141146.
Van, H. T. T., Hung, D. N., Van, V. T. T., & Xuan, N. T. (2019). Managing optimal
working capital and corporate performance: Evidence from vietnam. Asian Economic
and Financial Review, 9(9), 977.
Lakshmi Mani Gummadi – Sunday, 14 February 2021, 12:29 PM
Number of replies: 2
Working capital is a common measure of a company’s liquidity, efficiency, and overall
health. Because it includes cash, inventory, accounts receivable, accounts. If the
distinction in proportion between current resources and current liabilities goes
underneath 1, it’s a sign of negative working capital and an anything over two means
the corporate isn’t contributing its overabundance of resources. For one to comprehend
the idea of working capital top to bottom is by understanding the part of working capital
administration in this manner money transformation cycle and money spending plan and
their connection to working capital administration.
The working capital formula is:
Working capital = Current Assets – Current Liabilities
The working capital the formula tells us the short-term, liquid assets remaining after
short-term liabilities have been paid off. It is a measure of a company’s short-term
liquidity and important for performing financial analysis, financial managing.
Money change cycle is a device used to gauge to what extent an
organization will keep down its money in the event that it brings its speculations up in
exercises associated with widening client deals. Hence an aggregate of day’s
inventories exceptional with days deal remarkable short day’s payable extraordinary.
Both money transformation cycle and working capital interrelate in an organization
working framework on the grounds that the endeavor needs cash to the fighter on,
cooperate with vital collisions, produce pay to create techniques to enhance its focused
stature and in particular to pay its everyday costs.
It is basically the time taken to change over the contributions to money
outpourings. As it were, the aggregate time taken in a change of sum spent on crude
materials to money outpourings through offers of completed merchandise to the client
(Gitman, Juchau, and Flanagan, 2015). For instance, it is a little retail location
associated with offering the basic need things for the clients. The store administrator
requested the things on day 1, at that point got the materials on third and paid the sum
on the same day (Bamber and Parry, 2017). From the third day, the money
transformation cycle will be begun. It begins from the day installment is made and until
the point when the money is gotten from the clients by pitching to the clients until the
point when that materials will be as stock. With regards to an association money change
cycle is viewed as a cash saver, and program that encourages an association to
administer its waste, evade superfluous misfortunes, and outfit the organizations’ coffers
consequently keeping the venture from having any budgetary issues and moving from
Another imperative substance is the money spending plan about the working
capital administration. Instead of working capital money spending same as income is a
proportion of association’s capacity to cook for its errands in a predetermined period, for
example, a firm through a money spending plan can know whether it will have the
capacity to provide food for its up and coming bills. (Opler, T, 1999)
The utilization of a money spending plan is, they assist an association with
restricting its spending so as not to cause debt (Scherr, 2001). In this manner through
its practical assessment of how much money an association will have in the coming
budgetary period thus association works inside its methods, money spending pushes
the administration to anticipate sensibly subsequently having a genuine feeling of the
association’s activity (Opler, T, 1999). This procedure acclimates administration with the
rhythms of its uses and deals and factors that may cause afloat.
Opler, T., L. Pinkowitz, R. Stulz, R.Williamson, 1999, “The Determinants and
Implications corporate Cash Holdings,” Journal of Financial Economics.
The structure of Debt Maturity across the Firm Type Spectrum (n.d.). Retrieved from
https://mpra.ub.uni-muenchen.de/64860ce of a cash budget and cash conversion cycle.
García Teruel, P. and P. Martínez Solano, (2007) Effects of Working Capital
Management on SME Profitability, International Journal of Managerial Finance, Vol.3
Gitman, a. J., Juchau, R., & Flanagan, J. (2015). Principles of Management Finance.
Australia: Pearson Higher Education AU
Srikanth Talluri – Friday, 12 February 2021, 8:06 PM
Number of replies: 1
A business working capital management involves the practices employed by the
business to overlook the two working capital components to ensure that the company
operates without financial struggles. The working capital, better known as the net
operating current asset is important to the business for meeting the daily financial
requirements. Each business has its accounts receivables and the accounts payable,
which must be well managed to form the whole cash management (Morshed, 2020).
There are different factors responsible for affecting working capital. One of these factors
is inventory management which is responsible for controlling the business’s stock
movement and generally the supply chain. Inventory management is basically taking
note of every non capitalized goods from when it enters the business to the time it exits
as sales with its value getting captured at the point of sale. It keeps a record of goods
sold, available for sale, and any returned goods to make comparisons on the gross
sales and the actual net sales. Sales affect the account receivables and ultimately, the
working capital. The businesses can make decisions of their working capital
management by looking the amount of inventory available for sale and the sold
inventory to plan for the capital available (Jana, 2018).
Inventory management is followed closely by another factor that affects the working
capital, and that is the credit policy. A business can have very neat inventory
management but fail to have a favorable credit policy. The amount of cash available
should match the sales made in any business. In many instances, the credit extended to
clients surpasses the amount of cash received, thus bringing some problems in the
financial obligation. Debtors may frustrate the business by failing to pay back on the
stipulated time, leaving the company in a financial deficit. Too much credit ruins the
working capital as the business is unable to perform its day to day operations due to a
lack of willing suppliers as a result of continued late payments. A business can change
the credit policy to make sure that clients are only given credit based on their past credit
history and at a certain amount to avoid overselling on credit. The policy should be
made in full recognition that the business has recurrent financial needs that must be
met. Thus, the credit time frame should also accommodate the financial needs of the
company to avoid delayed payment that deprives the business of working capital (Tran,
Bin, L., Chen, J., & Tran, D. S. (2019). Exploring the Determinants of Working Capital
Management: Evidence across East Asian Emerging Markets. Economics,
Management & Financial Markets, 14(2).
Jana, D. (2018). Impact of working capital management on profitability of the selected
listed FMCG companies in India. International Research Journal of Business
Studies, 11(1), 21-30.
Morshed, A. (2020). Role of working capital management in profitability considering the
connection between accounting and finance. Asian Journal of Accounting Research.
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