(Related to Checkpoint 18.2) (Calculating the operating and cash conversion cycle) Carraway Seed Company Inc. has for many ye
ars cultivated and sold what are known as heritage plants and seeds. For example, the company has sought out older varieties of tomato plants that are no longer grown by commercial vegetable farmers since they either take too long to mature, do not ship well, or do not hold up for long on the store shelf. The company has recently been considering ways to reduce its investment in working capital in order to make itself more profitable. At present the firm has an inventory conversion period of 95 days and the majority of its customers take advantage of its credit terms of 20 days. The company purchases its inventory items on credit terms that allow them 52 days to pay but has always followed a policy of making cash payments for invoices as soon as they are received, so the accounts payable deferral period is typically only 12 days. a. What are Carraway's operating and cash conversion cycles? b. If Carraway were to decide to take full advantage of its credit terms and delay payment until the last possible date, how would this impact their cash conversion cycle? c. What would be your recommendation to the company with regard to its working capital management practices and why?
a.Operating Cycle = Inventory Conversion period + Days Sales Outstanding = 100 + 35 = 135 Days
Cash Conversion Cycle = Inventory Conversion period + Days Sales Outstanding - Days Payables Outstanding
= 100 + 35 - 11 = 124 Days
b.If Carraway were to decide to take full advantage of its credit terms and delay payment until the last possible date , their cash conversion cycle is 100 + 35 - 51 = 84 Days
c.Carraway should take its suppliers offer to finance its inventory with the interest free 35 Day loan
The correct answer is a) Gross domestic product (GDP)
Explanation:
Gross domestic product (GDP) is a fiscal measure of the market value of all the final goods and services produced annually. There are two types of GDP, nominal and Real.
Based on this scenario it can be said that Donald is entitled to Compensatory Damages. This is a lawsuit that covers the loss that the non-breaching party incurred as a result of the breach of contract. In this scenario, Donald's employer breached the contract by firing Donald before the twelve months. Therefore Donald can sue for compensatory damages which would be the amount of money that he would have made in the rest of the twelve months.
