Analyzing A Company's Liquidity Using The Cash Conversion Cycle

Description

What is the Cash Conversion Cycle? How do you calculate it? What does it really mean in regards to a company’s liquidity position?

Learn how the CPA should calculate and interpret the Cash Conversion Cycle formula to see its direct impact on the company’s liquidity. Included in the formula will be an assessment of acquiring inventory, collecting account receivables efficiently, and paying the account payables in a “judicious” manner.

Additionally, cover inventory accounting “costing methods,” financing inventory, and controlling inventory costs. The effective collection of receivables will also be reviewed including negotiating “reasonable” terms. Furthermore, the timing of paying the payables will be explored including the impact of taking “discounts.”

Conclude with a review of related "company" and "business owner" liquidity issues and models. 

The concepts of the Cash Conversion Cycle will be illustrated through a case study.
 

Highlights

• What is the Cash Conversion Cycle? How is it calculated? How does it directly impact a company’s liquidity?
• Inventory issues including costing methods, financing, and cost containment
• Receivables and “reasonable” terms
• Payables and the benefit of “discounts”
• Related "company" and "business owner" liquidity models
• The Cash Conversion Cycle applied through case study

Objectives

• Determine the Cash Conversion Cycle and its impact on the company's liquidity
• Identify inventory issues-cost methods, financing, and cost control
• Explore receivable collection issues
• Analyze payable management and discounts
• Recognize related "company" and "business owner" liquidity issues
• Apply the Cash Conversion Cycle concepts through case study

Designed For

CPAs, CFO/controllers, financial managers, auditors, financial analysts and practitioners.