Csh conversion cycles

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MBA Institute
4th Year 2008/2009
Yassine El Halaissi Marcellin Brunot
The Cash Conversion Cycle (CCC) is a powerful ratio for assessing how well a company is managing its capital. A company with a lower CCC is more efficient because it turns its working capital over more times per year, and that allows it to generate more sales per money invested.The Purpose of this thesis is to examine the relationship between the length of the Cash Conversion Cycle, the firm size and the profitability as well as exploring and measuring the CCC of a Supply Chain. The CCC of each supply chain part will be analyzed. We believe the real key to achieve improvement in the CCC is to take a total supply chain approach. It is therefore important to understandhow companies perform on this measurement, as there are huge variations from company to company within its supply chain throughout 5 Industries.

Cash conversion cycles, firm size, profitability and its impact on the international supply chain:
An investigation through Nine Industries

Executive Summary

Part I: The CCC and its role as a liquidity management tool

Introduction: The roleof the Cash Conversion Cycle

Chapter I: The panel of Industries |

Section I: Industries and Companies Background
Paragraph 1: Automotive
Renault; Daimler; Volkswagen; Ford
Paragraph 2: Luxury
LVMH; PPR; Remy-Cointreau; Richemond
Paragraph 3: Construction
Vinci; Hochtief; Bouygues; Eiffage;
Paragraph 4: Semi-conductors
ST Microelectronics; Texas Instruments; NXP;Infineon; Qualcomm
Paragraph 5: Aviation
EADS; Boeing; BAE Systems; Lockheed Martin
Paragraph 6: Hotels
Accor; Marriott; Intercontinental Hotels; Hilton Hotels
Paragraph 7: Wholesale/Retail
Carrefour; Auchan; Casino; Wal-Mart
Paragraph 8: Heavy Industry
Arcelor-Mittal; Alstom; Siemens AG; Bombardier
Paragraph 9: Pharmaceutical
Sanofi; Pfizer; Eli Lilly; Novo-NordiskSection II: Defining Cash Conversion Cycles
Paragraph 1: Definitions
Paragraph 2: Elements of computation

Chapter II: The CCC within companies and industries |

Section I: Case Study (Spread sheets)

Section II: Analysis and interpretation of findings
Paragraph1: Industry averages comparison
Section III: An International Supply Chain Case
Paragraph 1: The Automotive ExportSupply Chain

Part II: The CCC correlations with Firms indicators

Chapter I: The CCC & Profitability |

Section I: Elements of profitability
Paragraph 1: The CCC & Return On Assets
Paragraph 2: The CCC & Return on Equity

Chapter II: The CCC & Firm Size |

Section I: The Pearson Correlation Analysis
Paragraph 1: The Correlations
Section II:The One-way ANOVA Analysis
Paragraph 1: The Duncan Test

Final Conclusion

Bibliography & References

I. Introduction

One of the greatest challenges companies’ faces today is to deliver a competitive return to shareholders. Competition, labor costs and customer demand volatility are negatively impacting the return on capital. Supply chain management has the potential to improvethe three key drivers of financial performance (profitability, growth and capital utilization). However, few companies use the supply chain management as a tool to drive financial performances. For a successful firm management, a good liquidity management (current assets and liabilities) plays an important role. If any given company does not manage its liquidity position well, its current assets maynot meet its current liabilities. In this situation, this same company would have to look for external financing due to having issues with paying its short-term debts. According to Jose and Lancaster “ firms with glowing long term prospects and healthy bottom lines do not remain solvent without good liquidity management.
The cash conversion cycle metric is an important financial metric that...
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