Cash conversion cycle

CFA Level I Corporate Finance
#1

Hello,

I am trying to find out Cash conversion cycle, I have AR, AP turn over given and Inventory turnover is required.

For inventory turn over I have Cost of Goods sole, Ending inventory and asked to maintain 10% of inventory of COGS. Can some one give me a hint how to calculate Beginning inventory or Purchases both of them are missing.

Thank you

#2

Hi ifi,

Ending inventory = beginning inventory + purchases - COGS

For cash conversion cycle calculations, if purchases are unavailable ( or if you do not have sufficient info to solve for the above equation) it can be approximated with COGS.