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Consider the financial ratios for a particular company reported in the following table. Inventory Turnover (IT) 20 Accounts Receivable Turnover (ART) 30 Accounts Payable Turnover
Consider the financial ratios for a particular company reported in the following table.
Inventory Turnover (IT)
20
Accounts Receivable Turnover (ART)
30
Accounts Payable Turnover (APT)
45
(a) Calculate the cash conversion cycle (CCC) for this company. If a comparable company has a CCC of 34.30, which company is doing a better job of managing its working capital? Briefly explain why. (4 marks)
(b) Explain what a negative CCC means. Would a company rather have a positive or negative CCC?
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