Transcription of Working Capital and Cash Conversion Cycle - MIT CTL
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Working Capital and Cash Conversion Cycle - MIT CTL
1 Working Capital and Cash Conversion CycleJarrod GoentzelBalance sheet Snapshot of the firm s value Assets Current: cash, marketable securities, accounts receivable, inventories Long-term: property, plant, equipment (less accumulated depreciation) Intangible: patents, growth assets Liabilities Current: accounts payable, notes payable,.. Long-term: notes, bonds, deferred income taxes,.. Shareholders equity ( net worth) Stock: preferred, common Retained earningscurrent year future yearsJarrod Goentzel2 Income statement Describes performance between snapshots Explains why retained earnings has changed over timeRevenue or Sales (net of markdowns)Cost ofgoods sold (COGS)GROSSINCOMEO perating expenses ( Selling, general & administrative, or SG&A) OPERATING INCOMED epreciation & amortizationOPERATING INCOMEI nterest expenseOther non-operating
CCC: CASH CONVERSION CYCLE CCC: Cash Conversion Cycle (or Cash-to-Cash Cycle) • The terms Cash Conversion Cycle and Cash-to-Cash Cycle are used interchangeably • Focuses on A/R, A/P, and inventory • It is the amount of time (in days) that a company takes to sell inventory, collect receivables and pay accounts payable • The combined ...
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