Hip Replacement and Surgery Essay

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Module 4, Discussion 2



Question 1. There are several ways to reduce the cash conversion cycle. The big one is to turn over the inventory faster. If Lowe's is able to manage inventory in such a way that it moves items out of the store faster, then it will be able to collect cash for that inventory faster. That is not to say that moving inventory faster is easier, but it is definitely one of the main ways for a retailer to increase the pace at which it converts cash. One major big box retailer famously seeks to turn inventory over so quickly that it can pay for the goods with the revenue earned from selling those same goods – early enough to receive a discount!

There are other ways, however, that can be examined, that look at different other variables (Investopedia, 2017). Another variable in the cash conversion cycle is the pace by which goods are paid for, either by Lowe's or by its customers. As a highly unlikely example, Lowe's could insist that all goods are paid for only in cash – that would reduce the time it takes to collect cash for purchases to nil, thereby improving the cash conversion cycle.

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More likely, Lowe's would negotiate this with the credit card companies to receive payment in near real time, as any lag contributes to a worse cash conversion cycle.

The other means is if Lowe's delays on its own payables. If Lowe's delays on its payables long enough so that sends cash out much closer to the time at which it will receive cash for those goods, it will have a tighter cash conversion cycle.



Question 2. The distortions during periods of rapid price change are one of the reasons why LIFO is banned under IFRS (Tun, 2015). Not that any of that matters in the case of Ford. Ford does not have very much inventory on its balance sheet. As of the end of 2016, Ford had $8.898 billion in inventory, versus revenues of $151.8 billion, implying an inventory turnover of 17 times (Yahoo Finance, 2017). When one thinks about the inventory Ford should have – parts, works in progress and finished goods – it becomes apparent that this is a fairly low level of inventory. There are two main reasons for this.

The first main reason….....

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