Calculate the company cash conversion cycle

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Question - Read the following passage and answer the questions that follow: DIDO (Pvt) Ltd is a data management company operating in Palapye in Botswana. You are the financial manager for this company and the management has requested you to present a paper on short term financial management issues. DIDO (Pvt) Ltd has a permanent funding requirement of P135 000 in operating assets and seasonal funding requirements that vary between P0 and P990 000 and average P101 250. If the company can borrow short term funds at 6.25% and long term funds at 8%, and it can earn 5% on the investment of any surplus balances.

The company has annual sales of P10 million, a cost of goods sold of 75% of sales, and purchases that are 65% of cost of goods sold. The company has an Average Age Inventory of 60 days, an Average Collection Period of 40 days and an Average Payment Period of 35 days.

Required -

a. Calculate the company's cash conversion cycle.

b. Calculate the annual cost of an aggressive strategy for seasonal funding.

c. Calculate the annual cost of a conservative strategy for seasonal funding?

d. Describe any two common techniques of managing inventory.

Reference no: EM133061590

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