A firm is considering the following changes: increasing inventory variety, which will

increase inventory to $60,000, and offering more liberal sales terms, which will result in

average receivables increasing to $65,000. These actions are expected to increase sales to

$800,000 per year, and cost of goods will remain at 75%. Because of the increased

purchases, average payables will increase to $35,000.

1. What effect will these changes have on the cash conversion cycle?

2. What three actions can a firm take to minimize its net working capital?