C Corp, had the following data for 2008 (in millions). The new CFO believes that

Question

C Corp, had the following data for 2008 (in millions). The new CFO believes that (1) an improved inventory management system could lower the average inventory by $4,000, (2) that improvements in the credit department could reduce receivables by $2,000, and (3) that the purchasing department could negotiate better credit terms and thereby increase accounts payable by $2,000. Furthermore, she thinks that these changes would not affect either sales or the costs of goods sold. If these changes were made, by how many days would the cash convenience cycle be lowered? Original Revised Annual sales: unchanged $110,000 $110,000 Costs of goods sold: unchanged 80,000 80,000 Average inventory: lowered by $4,000 20,000 16,000 Average receivables: lowered by $2,000 16,000 14,000 Average payables: increased by $2,000 10,000 12,000 Days in a year 365 365 a. 37.4 b. 34.0 c. 41.2 d. 45.3

Explanation / Answer

d. 45.3

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