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Suppose your start-up buys $90,000 of merchandise each month, which is sold within 60 days. You have 45 days to pay your suppliers, and allow
Suppose your start-up buys $90,000 of merchandise each month, which is sold within 60 days. You have 45 days to pay your suppliers, and allow your customers 75 days to pay for their purchases. You expect your monthly sales to be $102,000. You borrow funds required to support operations from a bank and must repay the loans as soon as cash is available. Complete the following table by finding out the number of days each period takes, as well as the cash conversion cycle. Period Days Inventory conversion period Average collection period Payables deferral period Cash conversion cycle
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