TUTORIAL #1
Q1. What does the firm’s cash conversion cycle represent? What is the financial manager’s goal with regard to it? Why?

Ans: A firms’ cash conversion cycle represents the time it takes a firm to convert investments into cash. The financial manager’s role is to reduce this cycle to reduce cost that can then be reinvested in the firm

Q2 How should the firm manage its inventory, accounts receivable, and accounts payable in order to reduce the length of its cash conversion cycle?

Ans: The firm should have the least amount on inventories which reduces lost of sales, the least amount of account receivable which means collect on time and the greatest amount of account payables which will lengthen the payment of debt.

Q3 What is a collection policy? What is the typical sequence of actions taken by a firm when attempting to collect an overdue account?

Ans: Collection policy refers to the procedures used by a company to collect overdue accounts receivable. A firm may start with a reminder, form letter, telephone call or visit to encourage customer payment. They may then suspend further sales until the delinquent account is made current. If they make no progress the firm may negotiate with the customer for due amounts and report the customer to credit agencies. If the goods were sold with a lien attached, collateral or corporate/personal guarantees, the company may dispose to obtain payment. Finally, the loan may be turned over to a collection agency or an