What is xs products operating cycle

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Reference no: EM133449022 , Length: 5 pages

X Pvt. Ltd. is a Canadian company and wishes to evaluate its cash conversion cycle (CCC). Your preliminary research has identified that on average the inventory is held for 65 days; payment to suppliers takes 35 days; credit sales are collected in 55 days. The firm's annual sales are all on credit and amount to 2.1 million CAD. Cost of goods sold is 67% of sales. Purchases are around 40% of the cost of goods sold. Assume a 365-day year.

Question 1. What is Xs Products operating cycle (0C) and cash conversion (CCC)?

Question 2. How much has X Pvt. Ltd invested in (1) inventory, (2) accounts receivable, (3) accounts payable, and (4) the total CCC?

Question 3. If X Pvt. Ltd shortened its cash conversion cycle by reducing its inventory holding period by 5 days, what would be the total investment in CCC?

Question 4. You are asked to shorten Nepal handicraft's CCC by 5 days. Would you reduce the inventory holding period, the receivable collection period, or extend the accounts payable period? Why? What would be the amount of reduction or extension in each case?

Question 5. If the majority of your receivables are customers in the US, what could you do to protect yourself from foreign currency exchange rate risk? Provide a realistic hedging based on USD and CAD.

Question 6. Provide in-text citations and explain your work in detail.

Reference no: EM133449022

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