19.1

a. The new values for the accounts receivable period and inventory period are Days in inventory 250 5,305/365 17.2 days This is a reduction of 25 days from the original value of 42.2 days. Days in receivables = 300 5,887/365 = 18.6 days This is a reduction of 25 days from the original value of 43.6 days. The cash conversion cycle falls by a total of 25 +25=50 days.

b. The inventory period, accounts receivable period, and accounts payable period will all fall by a factor of 1.1. (The numerators are unchanged, but the denominators are higher by 10%.) Therefore, the conversion cycle will fall from 53.4 days to 53.4/1.10 = 48.5 days.