Monday, December 12, 2011

How does management might be able to reduce the cash conversion cycle?

Cash conversion cycle tells us how quickly a company turns cash invested in inventory into cash in the bank after collecting credit sales from customers and paying off its suppliers. The more quickly a company can turn over its inventory, the more efficiently it's managing its assets.|||And what are you asking? the CCC depends on what industry and business line you're in. If you have a lot of credit sales then you cannot collect as fast as a merchant dealing strictly with cash sales.

The quicker you collect your cash isn't always the best management policy. Keep the number similar to peers or better. If it's too low and that's public info. many will perceive that your management team is inept and too stringent, i.e dislike your business because your customers may disappear due to your policies!

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