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    jenir0111's Avatar
    jenir0111 Posts: 2, Reputation: 1
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    #1

    Apr 16, 2008, 11:43 AM
    Working Capital
    How does extending credit affect working capital requirements and the cash conversion period cycle?
    manik chand dey's Avatar
    manik chand dey Posts: 63, Reputation: 2
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    #2

    Oct 29, 2008, 11:19 PM

    Extending credit to the customers(debtors) means some funds got blocked in for some time till payments made by the customers. Hence in order to release the funds from debtors the enterprise needs to inject extra fund to meet the working expenses, as required for a going concern enterprise.
    Cash conversion period is the period between receipt of cash from debtors and payment made to suppliers in cash.Hence large number of debtors in total sales extend the cash conversion cycle.
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