Question
Fergusun Inc. has annual sales of $36,500,000, or $100,000/day on a 365-day basis. Fergusun also has 27,375,000 cost of the good sold. On average, the
Fergusun Inc. has annual sales of $36,500,000, or $100,000/day on a 365-day basis. Fergusun also has 27,375,000 cost of the good sold. On average, the company has $12,000,000 in inventory and $8,000,000 in accounts receivable. The firm is looking for ways to shorten its cash conversion cycle, which is calculated on a 365-day basis. Its CFO has proposed new policies that would result in a 20% reduction in both average inventories and accounts receivables. She also anticipates that these policies would reduce cost of the good sold and annual sales by 10%, while the payable deferral period would remain unchanged. What effect would these policies have on the company's cash conversion cycle? Round the change in CCC to the nearest whole day.
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