Cash management is a very important function of managers. Companies need to manage their operations in a way that they can sustain growth and yet not run out of cash.

Consider the case of the Red Hamster Manufacturing Corporation:

Red Hamster Manufacturing Corporation has forecasted sales of $30,000,000 for next year and expects its cost of goods sold (COGS) to remain at 70% of sales. Currently, the firm holds $3,100,000 in inventories, $2,300,000 in accounts receivable, and $2,800,000 in accounts payable.

Approximately how long does it take Red Hamster Manufacturing to convert its raw materials to its finished products and then to sell those goods? (Note: Use 365 days as the length of a year in all calculations, and round all values to two decimal places.)

43.10 days

53.88 days

51.19 days

59.27 days

On average, it takes ____ from the time a sale is made until the time cash is collected from customers.

Red Hamster Manufacturing relies on customer credit when it buys raw materials from its suppliers. On average, it takes ______ after the firm purchases materials before it sends cash to its suppliers. The length of Red Hamster Manufacturings cash conversion cycle (CCC) is ______. In general, firms prefer a LONGER OR SHORTER CCC.

What is the length of Red Hamster Manufacturings cash conversion cycle (CCC)?

38.17 days

31.53 days

33.19 days

41.49 days

In general, firms prefer a LONGER OR SHORTER CCC.