Answered step by step
Verified Expert Solution
Question
...
1 Approved Answer
( Related to Checkpoint 1 8 . 2 ) ( Calculating the operating and cash conversion cycle ) Carraway Seed Company Inc. has for many
Related to Checkpoint Calculating the operating and cash conversion cycle Carraway Seed Company Inc. has for many years cultivated and sold what are known as heritage plants and seeds. For example, the company has sought out older varieties of tomato plants that are no longer grown by commercial vegetable farmers since they either take too long to mature, do not ship well, or do not hold up for long on the store shelf. The company has recently been considering ways to reduce its investment in working capital in order to make itself more profitable. At present the firm has an inventory conversion period of days and the majority of its customers take advantage of its credit terms of days. The company purchases its inventory items on credit terms that allow them days to pay but has always followed a policy of making cash payments for invoices as soon as they are received, so the accounts payable deferral period is typically only days. a What are Carraway's operating and cash conversion cycles? b If Carraway were to decide to take full advantage of its credit terms and delay payment until the last possible date, how would this impact their cash conversion cycle? c What would be your recommendation to the company with regard to its working capital management practices and why? a Carraway's operating cycle is days. Round to the nearest whole number.
Related to Checkpoint Calculating the operating and cash conversion cycle Carraway Seed Company Inc. has for many years cultivated and sold what are known as heritage
plants and seeds. For example, the company has sought out older varieties of tomato plants that are no longer grown by commercial vegetable farmers since they either take too long to mature,
do not ship well, or do not hold up for long on the store shelf. The company has recently been considering ways to reduce its investment in working capital in order to make itself more profitable.
At present the firm has an inventory conversion period of days and the majority of its customers take advantage of its credit terms of days. The company purchases its inventory items on
credit terms that allow them days to pay but has always followed a policy of making cash payments for invoices as soon as they are received, so the accounts payable deferral period is
typically only days.
a What are Carraway's operating and cash conversion cycles?
b If Carraway were to decide to take full advantage of its credit terms and delay payment until the last possible date, how would this impact their cash conversion cycle?
c What would be your recommendation to the company with regard to its working capital management practices and why?
a Carraway's operating cycle is
days. Round to the nearest whole number.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
![blur-text-image](https://dsd5zvtm8ll6.cloudfront.net/includes/images/document_product_info/blur-text-image.webp)
Get Instant Access with AI-Powered Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
![blur-text-image](https://dsd5zvtm8ll6.cloudfront.net/includes/images/document_product_info/blur-subtext-image.webp)
Step: 3
![blur-text-image](https://dsd5zvtm8ll6.cloudfront.net/includes/images/document_product_info/blur-subtext-image.webp)
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started