Cycle

1) Describe the cash conversion cycle and discuss its importance to working capital management.

2) Trade credit presumably exists because it allows two trading partners to reduce the costs and risks of doing business. Explain how each of the following examples can make trade credit mutually beneficial for a supplier and customer:
(a) Suppliers know how to handle collateral better than other lenders such as banks.
(b) Suppliers already possess the information needed to evaluate credit worthiness.
(c) The extension of credit is a positive signal about product quality.(d) Trade credit reduces employee opportunism.