How long to realize cash from ending inventory

What is the margin of error View Answer. The manager at an automobile dealership would like to estimate the average satisfaction score from Based on this sample, can the manager conclude that the The following data are from a production process that makes units each hour. The data were collected over a normal hour shift one day. The data are shown in the table at the right. Using the first 10 hours as the calibration period, a Calculate the center line of the p chart.

The following data are from a production process that makes approximately units each hour. Historical data shows the proportion of defects to be 6. Either use technology to accommodate the different sample sizes, or use as an The state of New Jersey would like to estimate the proportion of voters who intend to participate Compute the days' sales in inventory, using the replacement cost for the inventory and the cost of goods sold.

Explain which days' sales in inventory figure is probably more realistic, the one computed in b or c. This E-mail is already registered as a Premium Member with us. Kindly login to access the content at no cost. This E-mail is already registered with us. Not my Question Bookmark. Create an Account and Get the Solution. Log into your existing Transtutors account. Have an account already? Click here to Login.

No Account Yet? Click here to Sign Up. Sign in with Facebook. Looking for Something Else? If a business has hit all the right notes and is efficiently serving the needs of the market and its customers, it will have a lower CCC value. CCC may not provide meaningful inferences as a stand-alone number for a given period.

Analysts use it to track a business over multiple time periods and to compare the company to its competitors. While comparing competing businesses, investors may look at a combination of factors to select the best fit. It indicates that the company is able to generate similar returns more quickly.

CCC has a selective application to different industrial sectors based on the nature of business operations. The measure has a great significance for retailers like Walmart Inc. WMT , Target Corp. COST , which are involved in buying and managing inventories and selling them to customers.

All such businesses may have a high positive value of CCC. Software companies that offer computer programs through licensing, for instance, can realize sales and profits without the need to manage stockpiles. EBAY and Amazon.

Often, online retailers receive funds in their account for sales of goods that actually belong to and are served by third-party sellers who use the online platform. This mechanism allows these companies to hold onto the cash for a longer period of time, so they often end up with a negative CCC.

Additionally, if the goods are directly supplied by the third-party seller to the customer, the online retailer never holds any inventory in-house. A Harvard Business blogpost attributes the negative CCC as a key factor in Amazon's survival of the dot-com bubble of Operating with a negative CCC became a source of cash for the company, instead of being a cost for it.

The cash conversion cycle CCC is one of several measures of management effectiveness. It measures how fast a company can convert cash on hand into even more cash on hand. The CCC does this by following the cash, or the capital investment, as it is first converted into inventory and accounts payable AP , through sales and accounts receivable AR , and then back into cash. Generally, the lower the number for the CCC, the better it is for the company.

When a company—or its management—takes an extended period of time to collect outstanding accounts receivable, has too much inventory on hand, or pays its expenses too quickly, it lengthens the CCC. A longer CCC means it takes a longer time to generate cash, which can mean insolvency for small companies. When a company collects outstanding payments quickly, correctly forecasts inventory needs, or pays its bills slowly, it shortens the CCC. A shorter CCC means the company is healthier. Additional money can then be used to make additional purchases or pay down outstanding debt.

When a manager has to pay its suppliers quickly, it's known as a pull on liquidity, which is bad for the company. When a manager cannot collect payments quickly enough, it's known as a drag on liquidity, which is also bad for the company. A higher, or quicker, inventory turnover decreases the cash conversion cycle.

Thus, a better inventory turnover is a positive for the CCC and a company's overall efficiency.