Below is information pertaining to Wah Seong Offshore Supplies Sdn Bhd:

• Annual sales of $80,000,000 and keeps average inventory of $20,000,000.
• On average, the company has accounts receivable of $16,000,000.
• Purchases are on credit, its trade credit terms are net 35 days, and it pays on time.

The companys finance manager is searching for ways to shorten the cash conversion cycle. If sales can be maintained at existing levels but inventory can be lowered by $4,000,000 and accounts receivable lowered by $2,000,000,

a) What will be the net change in the cash conversion cycle? Use a 365-day year. (Round-up to the closest whole day)

b) Based on the existing sales level, what is Wah Seongs WCR before and after the change in CCC?

c) How much would the dollars savings (increase in profits) be if the cost of financing its WCR is 12%?

d) If the reduction can be achieved by a change in only one of the 3 components, which one would you choose? Explain