The Gemini Corporation was operating its business as per the following working capital cycle days:

Scenario A

• Average age of inventory - 40 days
• Average collection period - 60 days
• Average payment period - 50 days

They have now recruited a consultant who advised them to reduce their total cash cycle. She proposed a new business model with the following working capital cycle days. Scenario B is indicated below:

• Average age of inventory - 15 days
• Average collection period - 5 days
• Average payment period - 50 days

Calculate the following:

1. Total cash cycle

2. Cash conversion cycle, for scenarios A & B

 

What are the benefits of negative CCC over positive CCC?