Primrose Corp has $17 million of sales, $3 million of inventories, $4 million of

Question

Primrose Corp has $17 million of sales, $3 million of inventories, $4 million of receivables, and $1 million of payables. Its cost of goods sold is 65% of sales, and it finances working capital with bank loans at an 9% rate. Assume 365 days in year for your calculations. Round intermediate steps to 2 decimal places.

a.) What is Primrose's cash conversion cycle (CCC)? Round your answer to two decimal places.
  days

b.)If Primrose could lower its inventories and receivables by 8% each andincreaseits payables by 8%, all without affecting sales or cost of goods sold, what would be the new CCC? Round your answer to two decimal places.
  days

c.)How much cash would be freed-up? Round your answer to the nearest cent.
$    

d.)By how much would pre-tax profits change? Round your answer to the nearest cent.
$   

Explanation / Answer

Sales = $17,000,000; Inventory = $3,000,000; A/R = $4,000,000; A/P = $1,000,000; COGS = 0.65(Sales); Interest on bank loan = 9%

CCC = Inventory conversion period + Average collection period

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