A. Length of Invenotry Conversion Period (ICP) 73
B. Length of Receivables Conversion Period (RCP) 51.1
C. Length of Operating Cycle (OC) 124.1
D. Length of the Payables Deferral Period (PDP) 54.75
E. Length of Cash Conversion Cycle (OC-PDP) 69.35
You have made some calculations on the cash conversion cycle -- so you are a little comfortable with that process. Now, let’s say that you are in upper management, and you want to "tighten your ship" a little to increase your cash flow just on current operations. You ask for the following, reasonable goals:
1) A 10% decrease in average inventory.
2) A 10% decrease in accounts receivable.
3) A 10% increase in accounts payable.
How do I take these above adjustments into account? I have a balance sheet/Income sheet and made the cash conversions above but have no idea how to re calculate with this information given?...