Suppose this company takes very active improvement measures and increases the inventory turnover rate from 17.88 times to 20 times. Even if the cycles of accounts receivable and accounts payable remain unchanged, the cash cycle will drop from 30.41 days to 20 days.
28.25 days. Because the inventory turnover rate has increased to 20 times, 365 days divided by 20 times equals 18.25 days, and the new average inventory holding amount has reached 18.25 days;
It can be calculated that the new cash cycle is 28.25 days. Multiply it by the average daily material cost of 164,400, and you get 4,644,300. In other words, even if there is 355,700 yuan less cash, the operating effect will be the same as the original 5 million yuan.
The cash is the same, thus greatly saving valuable cash flow.
We can also see that the higher the inventory turnover rate, the more cash flow it saves.
Chen Wanshi raised her head and looked at Niu Xiaobai and the other three people: "Everyone knows that 'inventory is the root of all evil'. So how evil is inventory? I want to tell you from the perspective of financial management.
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Suppose a company spent 10,000 yuan to buy back a part at the beginning of a certain year, and their warehouse kept the part for a year. During this year, the price the company had to pay was as follows:
First, the opportunity cost of capital. In our machinery industry, the general return on assets is about 10%. In other words, this inventory lost an opportunity cost of 1,000 yuan during this year;
Secondly, the rent of the warehouse. In order to store this part, some area of the warehouse will be occupied. Assuming that the rent of the warehouse on the market is 30 yuan per square meter per month, and this part occupies exactly one square meter,
The annual rent spent on it is 360 yuan;
Thirdly, administrative expenses are essential. It includes wages allocated to warehouse managers, equipment depreciation expenses, etc. Because for this part, they need to do cleaning, rust removal, protection, inventory, transportation, etc.;
Also, if you hold this part in your hands, it may have the cost of depreciation or scrapping. This is because this part may depreciate or be scrapped due to aging, outdated style, design changes, etc.;
Finally, they have to pay property taxes on these inventories and invest in property insurance for them...
Chen Wanshi finally concluded: "Managers, you can see that for this part, the company has to pay about 25% of the inventory holding cost every year. Therefore, it is imperative to reduce inventory and increase the inventory turnover rate.