Alpha Inc. had sales of $200,000, with a cost of goods sold of $172,000 and faces an APR of 6% on debt and has the following balance sheet:

Cash	$10,000	Accounts payable	$30,000
Receivables	$50,000	Other current liabilities	$20,000
Inventories	$150,000	Long-term debt	$100,000
Net fixed assets	$90,000	Common Equity	$150,000
Total Assets	$300,000	Total Liabilities & Equity	$300,000

The companys new CFO thinks that inventories are excessive and can be lowered to the point where the current ratio is equal to the industry average, 2.5X, without affecting either sales or net income. Assume that inventories are sold off and not replaced so as to reduce the current ratio to 2.5X and assume a 360 day year, what is the firms cash conversion cycle before and after these changes? With a smaller inventory, Total Assets will be smaller. To keep the balance sheet balanced, there has to be a matching decline in Liabilities. In practice, what kind of liabilities will likely fall as a result of the decline in inventory? Assuming that they finance their investment in net operating working capital with debt, by how much is their interest expense likely to fall as a result of this change? How would this affect the firms free cash flows?