Cash management is a very important function of managers. Companies need to manage their operations in a way that they can sustain growth and yet not run out of cash.

Consider the case of the Loud Noise Recordings Inc.:

Loud Noise Recordings Inc. has forecasted sales of $27,000,000 for next year and expects its cost of goods sold (COGS) to remain at 60% of sales. Currently, the firm holds $2,700,000 in inventories, $2,300,000 in accounts receivable, and $2,400,000 in accounts payable.

a. Approximately how long does it take Loud Noise Recordings to convert its raw materials to its finished products and then to sell those goods? (Note: In all calculations, assume that there are 365 days in a year.)

57.79 days

60.83 days

48.66 days

42.58 days

b. On average, it takes______from the time a sale is made until the time cash is collected from customers.

(26.43/ 23.32/ 31.09/ 32.64) days

c. Loud Noise Recordings relies on customer credit when it buys raw materials from its suppliers. On average, it takes______after the firm purchases materials before it sends cash to its suppliers.

(48.66/ 54.07/ 59.48/ 43.26)days