Question
Cash conversion cycle. Parramore corp has a $12 million of sales, $3 million of inventories, $3.25 million of recievables, and $1.25 million of payables. Its
Cash conversion cycle. Parramore corp has a $12 million of sales, $3 million of inventories, $3.25 million of recievables, and $1.25 million of payables. Its cost of goods sold is 75% of sales, and it finances working capital with bank loans at an 8% rate. what is Parramore's cash conversion cycle (CCC)? If Parramore could lower its inventories and receivables by 10% each and increase its payables by 10%, all without affecting sales or cost of goods sold, what would be the new CCC, how much cash would be freed up, and how would that affect pretax profits?
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