An operating cycle represents the amount of time it takes a company to acquire inventory, sell that inventory, and receive cash from its customers in exchange for the inventory sold. While a cash cycle represents the amount of time it takes a company to convert resources to cash. The cash cycle calculates the time during which each dollar is committed to various production and sales processes before it is then converted to cash in the form of accounts receivable, or paid invoices. The cash cycle begins when a company pays to purchase inventory and ends when that money is recovered by receiving payment from customers.

You are a consultant for Paschke Consulting Services. Your client, the CEO of Nordstrom Inc., has provided the following information about the firm: Sales of $15.86 billion with costs of goods sold equal to $10.16 billion. The average inventory is $2.01 billion, accounts receivable average is $0.15 billion, and payable average is $1.44 billion. Assume a 365 day year and tha the average operating cycle and cash cycle of its rivals is 70 days and 20 days, respectively Is your opinion is Nordstrom Inc. doing better or worse than its rivals. As a consultant what specific changes would you recommend to be made to the policies for the management of inventory, receivables, and payables? What will the implementations of the recommendations in (c) do to your Current Ratio and Asset Turnover Ratio