Ask Question, Ask an Expert

+1-415-315-9853

info@mywordsolution.com

Ask Basic Finance Expert

To further demonstrate the relationship between the cash conversion cycle and working capital, let me provide you with a real life ex. An aviation company that operates out of Scottsdale has a seasonal business cycle. Summers are very busy with work for the U.S government and many hours of aircraft time are provided to the Office of Aircraft Services (OAS). The problem is that OAS will only pay its receivables in 120 days. This creates a working capital issue for the company because there are numerous expenses involved with operating aircraft. For the first 120 days, the company is racking up expenses but receiving little or no income leaving the company short of cash to pay its bills, employees, purchase fuel, supplies, etc. To solve this problem, the company began factoring its receivables every year at the beginning of the busy season. The finance company that factors the receivables charges 15%. To make up this cost the company charges OAS an additional 15% (it's the government, they don't care). The finance company pays the aviation company for all invoices within 24 hours, then bills the OAS. Everyone is happy. OAS has its aircraft, the aviation company is being paid immediately and the finance company is making a good return.

Given this scenario describe the aviation company's cash conversion cycle.

Basic Finance, Finance

  • Category:- Basic Finance
  • Reference No.:- M939880

Have any Question? 


Related Questions in Basic Finance

An electronic retail chain wishes to minimize its ordering

An electronic retail chain wishes to minimize its ordering costs for a particularly popular model of laptop computer. This retail has a line credit to finance its inventory and the current holding rate is 5.5%. The chain ...

1 experimental studies are similar to non experimental and

1. Experimental studies are similar to non experimental and quasi-experimental studies because they all compare groups of scores. Describe the major difference between the experimental and the non experimental or quasi-e ...

1 how might you find information about measures that have

1. How might you find information about measures that have been developed by ofllerresearchers? 2. What are diary mefllodologies, and why are flley used? 3. Discuss ways in which interviewers can increase flle reliabilit ...

Contrast lookback options and barrier options and explain

Contrast lookback options and barrier options and explain the difference between in- and out-options? Explain how weather derivatives could be used by an electric utility to manage the risk associated with power consumpt ...

1 using psycinfo or a similar database find five articles

1. Using PsycINFO (or a similar database), find five articles on the topic of depression in young children. Print out a copy of the Record List page. 2. Using PsycINFO (or a similar database), find research articles on b ...

1 holding the cutoff period fixed which method has a more

1. Holding the cutoff period fixed, which method has a more severe bias against long-lived projects, payback or discounted payback? 2. For a firm that uses the NPV rule to make investment decisions, what consequences res ...

1 identity theft what constitutes identity theft2 identity

1. Identity Theft. What constitutes identity theft? 2. Identity Theft. Is identity theft only perpetrated to acquire money, goods, or services? 3. Impact of Identity Theft. Aside from the financial losses, what other neg ...

1 why might the after-tax internal rate of return on equity

1. Why might the after-tax internal rate of return on equity (ATIRRe) differ for a new investor versus an existing investor who keeps the property? 2. What factors should be considered when deciding whether to renovate a ...

1 compare and contrast the transport principles of economy

1. Compare and contrast the transport principles of economy of scale and economy of distance. Illustrate how they combine to create efficient transportation. 2. Describe the five modes of transportation, identifying the ...

1 why do researchers use deception2 why do some people

1. Why do researchers use deception? 2. Why do some people object to the use of deception in research? 3. What four goals should a debriefing accomplish?

  • 4,153,160 Questions Asked
  • 13,132 Experts
  • 2,558,936 Questions Answered

Ask Experts for help!!

Looking for Assignment Help?

Start excelling in your Courses, Get help with Assignment

Write us your full requirement for evaluation and you will receive response within 20 minutes turnaround time.

Ask Now Help with Problems, Get a Best Answer

Section onea in an atwood machine suppose two objects of

SECTION ONE (a) In an Atwood Machine, suppose two objects of unequal mass are hung vertically over a frictionless

Part 1you work in hr for a company that operates a factory

Part 1: You work in HR for a company that operates a factory manufacturing fiberglass. There are several hundred empl

Details on advanced accounting paperthis paper is intended

DETAILS ON ADVANCED ACCOUNTING PAPER This paper is intended for students to apply the theoretical knowledge around ac

Create a provider database and related reports and queries

Create a provider database and related reports and queries to capture contact information for potential PC component pro

Describe what you learned about the impact of economic

Describe what you learned about the impact of economic, social, and demographic trends affecting the US labor environmen