Answers and Solutions: 22 - 1 Chapter 22 Working Capital Management ANSWERS TO END-OF-CHAPTER QUESTIONS 22-1 a. Working capital is a firm’s investment in short-term assets--cash, marketable securities, inventory, and accounts receivable. Net working capital is current assets minus current liabilities. Net operating working capital is operating current assets minus operating current liabilities. b. The inventory conversion period is the average length of time it takes to convert materials into finished goods and then to sell them. It is calculated by dividing total inventory by sales per day. The receivables collection period is the average length of time required to convert a firm’s receivables into cash. It is calculated by dividing accounts receivable by sales per day. The cash conversion cycle is the length of time between the firm's actual cash expenditures on productive resources (materials and labor) and its own cash receipts from the sale of products (that is, the length of time
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