Essentials of Corporate Finance



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Ross FCF 10Ce Ch18
Ross FCF 10Ce Ch18

Example – Cash Cycle

  • Payables Period
    • Average payables = (2200 + 3500)/2 = 2850
    • Payables turnover = 12,000/2850 = 4.21
    • Payables period = 365 / 4.21 = 87 days
  • Cash Cycle = 222 – 87 = 135 days
  • We have to finance our inventory for 135 days
  • We need to be looking more carefully at our receivables and our payables periods – they both seem extensive
  • 18-

Short-Term Financial Policy

  • 18-

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