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mediumFinancial Analyst interview question

The CFO wants to release cash from working capital. What levers would you look at?

What the interviewer wants to hear

  • Receivables: credit terms, collections, invoicing speed, early payment discounts
  • Inventory: SKU rationalisation, better demand planning, slow-moving stock
  • Payables: negotiate terms without harming suppliers, supply chain finance
  • Quantify cash released per day of improvement
  • Track with DSO, DIO, DPO and cash conversion cycle

Model answer

I would look at the three parts of the cash conversion cycle. On receivables, I would check credit terms by customer, overdue ageing, invoicing delays and disputes, and set up collection follow-ups and possibly early payment discounts for slow payers. On inventory, I would find slow-moving and obsolete SKUs, improve demand forecasting, and agree safety stock levels with supply chain. On payables, I would review whether we pay suppliers earlier than terms require and negotiate longer terms or use supply chain finance, while being careful not to damage key suppliers, especially smaller ones. I would quantify each lever: for a business with 365 crore of sales, cutting DSO by 5 days releases about 5 crore of cash. Then I would set targets, track DSO, DIO, DPO and the cash conversion cycle monthly, and report the cash released to the CFO.

Can you answer it under time pressure?

Take a timed medium round and get scored on every answer.

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