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QuestionsCategory: Financials QuadrantReceivable Days and Payable Days
Amanda Sulistyo asked 3 years ago

I have a few companies that have been on my radar for the past few weeks, and I’ve been using the flow chart and checklists to see if I should buy these companies. I get past the other parts of the flow chart pretty easily, but I always get stuck at Receivable Days and Payable Days. Where can I go to check if their receivables and payables are above/under the industry average? How do I know if it can be improved? Where can I find a formula, or something to help me calculate the cash conversion cycle?

3 Answers
Jieren Zheng answered 3 years ago

You can find the cash conversion cycle formula here in the video of this course:
https://investmentquadrant.com/the-financials-quadrant/cash-conversion-cycle/
You can do a rough comparison of other competitor companies to have a look at the CCC to have a gauge, most of the time it shouldn’t differ hugely, but when it does, do check out why.
Hope it helps.

Amanda Sulistyo replied 3 years ago

The formula requires me to know the inventory days, receivable days, and payable days. The financial statements do not provide that information. Where can I get them.

Amanda Sulistyo replied 3 years ago

Also, the company that I’m looking at is a company that produces gaming content. I don’t think it has inventory that they are selling. Should I even be using this metric?

Victor Chng replied 3 years ago

Thanks JR

Victor Chng answered 3 years ago

Hi Amanda,
Can you let me know the company name so that I can look through the number or business and point you to the right direction.

 

On the side note, you don;t need to calculate the inventory, receivables or payables days manually. You can download the excel file under the checklist ( https://investmentquadrant.com/checklists/ ). Those figure will auto compute when you key in the necessary number.

Amanda Sulistyo replied 3 years ago

The company is IGG Inc.

Ahh. I didn’t know it would compute automatically. Thanks.

Victor Chng answered 3 years ago

Hi Amanda,
 
I just briefly look through the business, i think you can just focus on Receivables and payables days as the business do not have inventory. Hence, inventory days is irrelevant.