1. What is the significance to working capital management of matching sales and production? What is the significance to working capital management of matching payables with receivables?
2. By using long-term financing to partially fund current assets, a company may have less risk but lower profits than a firm with a normal financing plan, i.e. matching A/R = 1.5 x A/P. Explain what a "normal financing plan" is and the significance of financing working capital while maintaining appropriate current asset ratios.
3. Answer the following problem and show the calculation: What is the cash conversion cycle for a company with a receivables period averaging 40 days, a payables period averaging 30 days, and an inventory period averaging 60 days?