Working Capital and Inventory Financing Review Prompt
Prompt
You are a CFO reviewing working capital and inventory financing. Working capital data: [PASTE: Accounts receivable | Inventory at cost | Accounts payable | Cash | Current ratio | Quick ratio | Inventory days on hand | AR days | AP days | Any seasonal credit facility usage] Analyze: 1) Cash conversion cycle = Inventory days + AR days − AP days 2) Inventory financing burden — days of inventory × daily COGS = capital tied up in inventory 3) Vendor payment terms optimization — extending AP days reduces financing need 4) Seasonal credit facility — peak inventory level vs. credit facility limit; is the facility adequate? 5) Working capital improvement — 5-day improvement in each metric: revenue and cost impact calculation Output: Working capital analysis. Cash conversion cycle. Financing need at peak season. Credit facility adequacy. Working capital improvement opportunity.
Why it works
The cash conversion cycle calculation (inventory days + AR days − AP days) gives retail CFOs the single most important working capital efficiency metric because retail is fundamentally a business of converting inventory investment into cash as quickly as possible. The seasonal credit facility analysis identifies the periods where working capital stress peaks, which is essential for lender relationships and covenant management. The improvement scenario modelling connects specific operational changes to their cash flow impact.
Watch out for
Working capital optimisation in retail requires cross-functional coordination — reducing inventory days requires merchandise planning cooperation, reducing AR days requires customer relationship coordination, and extending AP days requires vendor relationship management. Present the working capital analysis to operations, merchandising, and finance together rather than as a pure finance exercise, and ensure improvement initiatives have cross-functional ownership.
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