17-7 CASH CONVERSION CYCLE

Christie Corporation is trying to determine the effect of its inventory turnover ratio and days
sales outstanding (DSO) on its cash conversion cycle. Christie's 2015 sales (all on credit)
were $150,000; its cost of goods sold is 80% of sales; and it earned a net profit of 6%, or
$9,000. It turned over its inventory 6 times during the year, and its DSO was 36.5 days. The
firm had fixed assets totaling $35,000. Christie's payables deferral period is 40 days.
a. Calculate Christie's cash conversion cycle.
 Inventory turnover ratio = Sales / Inventory
6 = $150,000 / Inventory
Inventory = $150,000 / 6
Inventory = $25,000
 Inventory conversion period = Inventory / Cost of goods per day
= $25,000 / ((80% x $150,000) / 365 days)
= 25,000 / 328.767
= 76.041 days
 Cash conversion cycle = Inventory conversion period + Average collection
period - Payables deferral period
= 76.041 + 36.5 – 40
= 72.541 days

b. Assuming Christie holds negligible amounts of cash and marketable securities, calculate its
total assets turnover and ROA.
 Total assets = Inventory + Receivables + Fixed Assets
= $25,000 + (($150,000/365) x 36.5) + $35,000
= $25,000 + $15,000 + $35,000
= $75.000
 Total assets turnover = Sales / Assets
= $150,000 / $75,000
=2x
 ROA = Profit margin x Total assets turnover x Equity multiplier
= 6% x 2
= 12%
c. Suppose Christie's managers believe that the inventory turnover can be raised to 9:0 times.
What would Christie's cash conversion cycle, total assets turnover, and ROA have been if the
inventory turnover had been 9.0 for 2015?
 Inventory turnover ratio = Sales / Inventory
9 = $150,000 / Inventory
Inventory = $150,000 / 9
Inventory = $16,667
 Inventory conversion period = $16,667 / ((80% x $150,000) / 365 days)
= 16,667 / 328.767
= 50.695 days
 Cash conversion cycle = 50.695 + 36.5 – 40
= 47.195 days
 Total assets = $16,667 + (($150,000/365) x 36.5) + $35,000
= $16,667 + $15,000 + $35,000
= $66,667
 Total assets turnover = $150,000 / $66,667
= 2.250 x
 ROA = 6% x 2.250
= 13.5%
Konsep Cash Conversion Cycle (CCC)
Cash conversion cycle merupakan sebuah pengukuran yang menunjukkan lamanya
waktu antara membayar modal kerja dan mengumpulkan cash dari penjualan modal kerja
(Brigham dan Houston, 2018). Menurut (Jose dkk., 1996 cit. Toro dan Hartomo, 2014), cash
conversion cycle atau siklus konversi kas adalah pengukuran waktu antara pengeluaran kas
untuk sumber daya dan penerimaan kas dari penjualan produk. Konsep ini dikemukakan pada
tahun 1974 oleh Lawrence J. Gitman (Toro dan Hartomo, 2014).
Terdapat tiga elemen dalam cash conversion cycle, yaitu inventory conversion period,
average collection period, serta payables deferral period. Cash conversion cycle dapat
dihitung dengan menambahkan inventory conversion period dengan average collection period
lalu dikurangkan dengan payables deferral period (Brigham dan Houston, 2018).
Penghitungan cash conversion cycle dapat digambarkan dengan rumus sebagai berikut:
Cash conversion cycle = Inventory conversion period + Average collection period -
Payables deferral period

Inventory conversion period merupakan waktu rata-rata yang diperlukan untuk

mengubah bahan mentah menjadi barang jadi dan kemudian menjualnya (Brigham dan
Houston, 2018). Inventory conversion period dapat dicari dengan rumus sebagai berikut:
Inventory
Inventory conversion period =
Cost of goods per day

Menurut (Brigham dan Houston, 2018), average collection period adalah rata-rata
lamanya waktu yang dibutuhkan untuk mengubah piutang perusahaan menjadi kas. Average
collection period juga dapat disebut dengan days sales outstanding (DSO). Average collection
period dapat dihitung dengan rumus sebagai berikut:
Receivables
Average collection period = ACP (or DSO) =
Sales / 365

Payables deferral period merupakan rata-rata lamanya waktu antara pembelian bahan
serta tenaga kerja dengan pembayaran yang harus dilakukan untuk hal-hal tersebut (Brigham
dan Houston, 2018). Payables deferral period dapat dicari dengan rumus sebagai berikut:
Payables Payables
Payables deferral period = =
Purchase per day Cost of goods sold / 365
 Daftar Pustaka
Brigham, E.F., dan Houston, J.F. (2018). Essentials of Financial Management, 4th edition.
Cengage Learning, Singapore.
Toro, M. J. S., dan Hartomo, D. D. (2014). Siklus Konversi Kas: Alternatif rasio likuiditas
yang lebih baik dalam memprediksi profitabilitas. Jurnal Bisnis & Manajemen,
Surakarta 14: 31-46