eBook Problem Walk$-$Through

Parramore Corp has $$16$ million of sales, $$1$ million of inventories, $$3\mathrm{.}25$ million of receivables, and $$1\mathrm{.}75$ million of payables. Its cost of goods sold is $80\%$ of sales, and it finances working capital with bank loans at an $8\%$ rate. Assume $365$ days in year for your calculations.

What is Parramore's cash conversion cycle $($CCC$)?$ Do not round intermediate calculations. Round your answer to two decimal places.

days

If Parramore could lower its inventories and receivables by $8\%$ each and increase its payables by $8\%,$ all without affecting sales or cost of goods sold, what would be the new CCC$?$ Do not round intermediate calculations. Round your answer to two decimal places.

days

How much cash would be freed up$,$ if Parramore could lower its inventories and receivables by $8\%$ each and increase its payables by $8\%,$ all without affecting sales or cost of goods sold? Write out your answer completely. For Example, $13\mathrm{.}2$ million should be entered as $13,200,000.$ Do not round intermediate calculations. Round your answer to the nearest dollar.

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By how much would pretax profits change, if Parramore could lower its inventories and receivables by $8\%$ each and increase its payables by $8\%,$ all without affecting sales or cost of goods sold? Write out your answer completely. For Example, $13\mathrm{.}2$ million should be entered as $13,200,000.$ Do not round intermediate calculations. Round your answer to the nearest dollar.

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