Anil Industries turns over its inventory 6 times each year; on an average, debtors make the payment to the firm on 30^th day and firm maintain the average payment period of 20 days. The firms annual operating-cycle investment is $6 million. Assume a 360-day year.

1. Calculate the firms cash conversion cycle, its daily cash operating expenditure, and the amount of resources needed to support its cash conversion cycle.
2. Find the firms cash conversion cycle and resource investment requirement if it makes the following changes simultaneously.

1. Shortens the average age of inventory by 2 days.
2. Speeds the collection of accounts receivable by an average of 7 days.
3. Extends the average payment period by 5 days.

3. If the firm pays 11% for its resource investment, by how much, if anything, could it increase its annual profit as a result of the changes in part II?

If the annual cost of achieving the profit in part c is $60,000, what action would you recommend to the firm? Why?