Session 01Exercise B

Session 01 · CCC

Debrief Questions

Question 1

“What sounds commercially attractive?”

  • Large supermarket customer
  • Revenue growth
  • Market visibility
  • Strong strategic positioning
  • Potential future contracts

Question 2

“What is happening to cash?”

Liquidity Impact Breakdown

1.

DSO

Increases

The supermarket now pays in:

  • 75 days instead of 30

Meaning:

  • fruit is sold quickly in stores
  • but the supplier waits much longer for cash

Revenue rises before cash arrives.

2.

DIO · Inventory Risk

Increases

The company:

  • commits to growers earlier
  • positions safety stock near distribution centers
  • increases seasonal inventory

But fruit is perishable.

Meaning:

  • cash is tied up in inventory
  • spoilage risk increases
  • unsold fruit may become waste within days

Inventory is not “stored value” — it can literally rot.

3.

DPO

Decreases

Growers want faster payment.

Meaning:

  • cash leaves earlier
  • suppliers are effectively financed by the company

The Core Insight

“Can a company show strong sales growth while becoming less liquid?”

Absolutely.

In fresh produce businesses this is common because:

  • cash timing matters enormously
  • supermarkets are powerful buyers
  • perishability compresses decision time
  • operational mistakes rapidly become cash losses

Final Twist

“Two months later the Treasury team warns that short-term borrowing requirements have increased sharply despite record sales.”

“Why?”

  • longer customer payment terms
  • more inventory
  • faster supplier payments
  • spoilage exposure

…to deterioration in the Cash Conversion Cycle.

  • commercial decisions immediately affect liquidity
  • participants intuitively understand waste / spoilage

It also mirrors real supermarket dynamics very closely:

  • retailer bargaining power
  • service-level penalties
  • promotional pressure
  • grower financing tension
  • forecasting risk
  • seasonal working capital spikes

So CCC is not an accounting concept, but an operational reality.

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