Explain the difference between permanent and temporary working capital, and describe what a firm could do to minimize risk.

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Purpose of Assignment

One downfall of many small businesses is the inability to keep sufficient cash on hand and to calculate the amount of liquid cash that is necessary for day-to-day operations. This assignment asks you to calculate cash conversion and to determine the funds necessary for the maintenance of business health.

Assignment Steps

Complete Parts 1 and 2 of the Cash Conversion Cycle. Use Microsoft® Excel® to record your calculations. Note: formulas for the cash conversion cycle are included in the document.

Write a 350- to 525-word paper in which you complete the following:

  • Explain the difference between permanent and temporary working capital, and describe what a firm could do to minimize risk.
  • Evaluate how small adjustments made to total cash conversion can have a large impact upon the financial health of a company.
  • Describe Economic Order Quantity (EOQ Using the EOQ formula and an example product for your business, determine the optimal quantity of the item to purchase that will help to minimize the annual total costs of keeping that item in inventory.
  • Describe what a Just-in-Time (JIT) inventory system is and its significance in reducing inventory costs.
  • Show all cash conversion cycle calculations in a spreadsheet, and attach it as an Appendix.

Format your paper consistent with APA guidelines.

Click the Assignment Files tab to submit your assignment.