BIL 116 Lecture Notes - Lecture 5: Cash Conversion Cycle, Reserve Requirement, Cash Flow
Document Summary
From accounts receivable and below we are taking the change. 11/10/2015 (increase or decrease) from one year to the next. You can check you increase/decrease in cash flow by making sure it is equal to the difference between your opening and closing cash flows in the statement of cash flows. Root cause of cash ratio higher than the industry because of their policy to maintain a lot of cash. Larger parts inventories is caused by longer delivery times. Cash conversion cycle is companies need for financing. Cash conversional cycle is lower than industry because they"re selling their inventory faster than the industry mainly because of finished goods in this case (inventory days are lower = faster selling) The company is using a significant amount (63%) of debt (more than the industry) to pay for their activities/functions. Debt isn"t necessarily bad but it is riskier than equity ( a new company would have more debt or a growing company)
