Introduction
Most of the people regarded accounting and finance as similar things; however the ideas and concepts behind both of these things are totally different with each other. There are number of concepts which specifically stride under the ambit of accounting and finance and among these concepts, the name of Cash Conversation is one of them, which has its own significance and importance in a broad nutshell (Towers-Clark, 2011).
Cash Conversation is a concept, used by the organizations to assess the time in which the cash would be converted for the company and then transform or reflect in their financial statements. This is one of the most important concepts that come under the umbrella of organizational productivity. Cash Conversion Cycle (CCC), also known as Cash Operating Cycle (COC) is basically an important thing used by the companies. CCC is basically referred to a metric that expresses the length of time in days which takes a company to convert its resources into the cash inflows. It is one of the most effective methods for the companies. The formula of the same is mentioned below,
Analysis and Findings
Analysis and findings are some of the major things which used to cover up this particular thing in total. The first thing which needed to be analyzed in this particular scenario is days to outstanding inventory. The computation of days to inventory outstanding is mentioned below in particular.
Beginning Inventory and ending inventory computation mentioned below. Days have been selected on the level of 360 days
Now, we are going to analyze the days to sales outstanding
Now we are analyzing the days to payable
After analyzing all of the three things mentioned in the formula, we are all set to analyze the cash operating cycle of MNQ Company. The CCC is mentioned below
Conclusion
As conclusion, it could be said that, the cash operating cycle of the selected company is very high, which means that it requires 300 to 360 days for the company to generate cash for their business which is not at all effective for a company from any viewpoint. Such type of companies has been regarded as ineffective companies. The average Cash Conversation Cycle of the company is 310 days, which is extremely high and the company has to decrease the same in total, otherwise, the company may be in the sigh of economic hardship in future terms.
References
Towers-Clark, J. (2011). Accounting: A Smart Approach. London: Oxford University Press.
