Halcyon Bank Is Profitable and Cash Is Still Tight
Halcyon Bank is a retail banking business in UK. Last year it turned over £871 M at a 45% gross margin and reported a profit — yet it drew on its overdraft in seven months out of twelve.
The treasurer has pulled the working capital numbers: receivables run at 86 days, inventory at 82 days, and the company pays its own suppliers in 57 days.
Sales insist the long payment terms are what win contracts in this market. Procurement say the inventory is a deliberate buffer after a supply disruption two years ago. The bank has asked for a plan before renewing the facility.
financials
- cogs m
- 479
- revenue m
- 871
- gross margin pct
- 45
derived hints
- revenue per day m
- 2.39
- cash conversion cycle days
- 111
- cash released per 21 dso days m
- 50.2
working capital days
- days sales outstanding
- 86
- days payables outstanding
- 57
- days inventory outstanding
- 82
Advise the CFO. Your answer should provide:
- Analysis — compute the cash conversion cycle and how much cash is tied up. Convert days into money.
- Risks — what breaks commercially if you pull each lever.
- Recommendation — which lever first, how much cash it frees, and what it costs you.
State any assumptions you make.
80 points, 60% to pass.
- recommendation20
- market analysis15
- risk assessment20
- financial analysis25
Reveal suggested structure
Cash conversion cycle = DSO + DIO - DPO. Translate days into currency at revenue or COGS per day, then rank levers by cash freed against commercial cost.