How much money does reducing the CCC save? A firm that generates annual sales of $72M has cost of goods sold (COGS)equal to 50% of sales and cost of purchases equal to 80% of COGS. It on average turns over inventory nine times a year, pays accounts in 35 days and collects accounts in 60 days. It costs the firm 14% per year to finance capital tied to the CCC. Answer the following questions based on a 360-day (aka commercial) year. (A) How long is the firms CCC?

(B) How much capital is tied to the CCC?

C)

The firm would like to cut AAI by 10 days and ACP by 5 days and increase APP by 5 days. If successful, the CCC would be reduced by how many days? How much money would this save every year?

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