FAMCo, has for many years cultivated and sold what are known a heritage plants and seeds. For example, the company has sought out older varieties of tomato plants that are no longer grown by commercial vegetable farmers since they either take too long to mature, do not ship well, or do not hold up for long on the store shelf. The company has recently been considering ways to reduce its investment in working capital in order to make itself more profitable. At present has an inventory conversion period of 90 days and the majority of its customers take advantage of its credit terms of 30 days. The company purchases its inventory items on credit terms that allow them 45 days to pay but has always followed a policy of making cash payments for invoices as soon as they are received, so the accounts payable deferral period is typically only 5 days.

1. What are FAMCo operating and cash converting cycles?
2. If FAMCo were to decide to take full advantage of its credits term and delay payment until the last possible date, how would this impact their cash conversion cycle?
3. How much would working capital be reduced if they stretched their payments to suppliers from 45 days to 50 days considering that they produce and sell 2000 kilos (total plants and seeds) per day with material cost 2$ per kilo and no other cost?