Introduction to Corporate Finance

18: Cash Conversion, Inventory and Receivables Management

Upon graduation, you receive a job offer from Pronto

Manufacturing. In this position, you will be responsible

for implementing the policy and management of cash

conversion, inventory and receivables. To get ready for the

start of this job, you decide to review the following topics.

ASSIGNMENT

1 What is the cash conversion cycle, and what is the

difference between it and the operating cycle?

2 What are some ways of shortening the cash conversion

cycle?

3 Discuss techniques for controlling inventory.

4 What aspects must managers consider when deciding

on a trade credit policy for the company?

5 Describe the five Cs of credit.

6 What factors should managers consider when

determining the company’s collection policy?

mini case

CASH CONVERSION, INVENTORY AND RECEIVABLES MANAGEMENT

ONLINE STUDY TOOLS

Visit http://login.cengagebrain.com and

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for 12 months’ access to the resources and

study tools for this chapter. The CourseMate

website contains:

Smart concepts – step-by-step explanations of

concepts

» See a demonstration of the trade-offs

and optimum level of a given operating

asset.

Smart solutions – step-by-step explanations of

problems

» See the solution to Problem 18-13.

Smart videos

» Jackie Sturm, Director of Finance for

Technology and Manufacturing, Intel

Corp.

» Smart video: Jon Olson, Chief Financial

Officer, Xilinx Corp.

Interactive quizzes

Audio

Flashcards and more.