What is the aim of studying cash conversion cycle and its calculation?

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How do you calculate the cash conversion cycle?
Posted by:
Mohammed El Tahir Mohammed Yousif
22-July-2017

The aim of studying cash conversion cycle and its calculation is to change the policies relating to credit purchase and credit sales. The standard of payment of credit purchase or getting cash from debtors can be changed on the basis of reports of cash conversion cycle. If it tells good cash liquidity position, past credit policies can be maintained. Its aim is also to study cash flow of business. Cash flow statement and cash conversion cycle study will be helpful for cash flow analysis.

Credit Control

Question added by Nadia Ahmed Mohammed Saeed , T/L. Credi t& Risk , Canar Telecommunication Co. LTD.
Date Posted: 2013/08/26

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by Aziz ur Rehman ur Rehman , Assistant Manager Finance , Central Power Puchasing Agency (CPPA)

The aim of cash conversion cycle lies in its dormula.
the formula describe that the how much amount must be collected trhough inventory deployed and sufficient to pay the creditors.
it also aware us about the over all liquidity position of firm/company.
in this way we can focus about the cash dump in current assets or over payment to the creditors with the availing the opportunity to utlize the cash Formula Cash Cycle= sum of collection or conversion Periods of current Assets - sum of payment period to current liabilites.
Aziz ur Rehman skype azize1130

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