In the early 1990s, Cranston Dispensers, Inc. quickly realized that concern for the environment would cause many consumer product manufacturers to move away from aerosol dispensers and toward non-threatening mechanical alternatives. for the ozone layer. In the decades that followed, most countries banned the most popular aerosol propellants, first chlorofluorocarbons and then hydrochlorofluorocarbons. As a leading manufacturer of specialty spray and pump containers for a variety of products in the cosmetic, household cleaning and pharmaceutical industries, Cranston experienced a rapid increase in sales and profitability after making this strategic move. At that moment,

However, for most of 20x4 and 20x5, Cranston's stock price was falling while shares of other companies in the industry were rising. At the end of the 20x5 fiscal year, the company hired Susan McNulty as its new treasurer, with the expectation that she would diagnose Cranston's problems and improve the company's financial performance relative to its competitors. She decided to begin the task with a comprehensive review of the company's working capital management practices.

While examining the company's financial statements, he noticed that Cranston had a higher percentage of current assets on its balance sheet than other companies in the packaging industry. The high level of current assets caused the company to carry more short-term debt and higher interest expenses than its competitors. It was also causing the company to lag behind its competitors in some key financial measures, such as return on assets and return on equity.

In an effort to improve Cranston's overall performance, Susan decided to conduct a comprehensive review of its working capital management policies, including those related to the cash conversion cycle, credit policy, and inventory management. Below are Cranston's financial statements for the three most recent years.

Cranston Dispensers

Statement of income

($ in thousands)

Account	20x5	20x4	20x3
Sales	3,784	3,202	2,760
cost of goods sold	2,568	2,172	1,856
Gross profit	1,216	1,030	904
Sales and Administration	550	478	406
Depreciation	247	230	200
Earnings before interest and taxes	419	322	298
Interest expenses	20	25	14
taxable income	399	297	284
Taxes	120	89	85
Net Income	279	208	199

Cranston Dispensers

Balance sheet

($ in thousands)

Account	20x5	20x4	20x3
Current assets
Money	341	276	236
accounts receivable	722	642	320
Inventory	595	512	388
Total current assets	1,658	1,430	944
net fixed assets	1,822	1,691	1,572
total assets	3,480	3,121	2,516
current liabilities
Accounts payable	332	288	204
Accumulated expenses	343	335	192
short term notes	503	491	243
Total current liabilities	1,178	1,114	639
long term debt	398	324	289
Other long-term liabilities	239	154	147
Full responsibility	1,815	1,592	1,075
owner's equity
common equity	1,665	1,529	1,441
Total Liabilities and Equity	3,480	3,121	2,516

Suppose Cranston institutes a policy of giving a 1% discount for payment within fifteen days with the full amount due in 45 days. Half of the customers take advantage of the discount, the other half take an average of sixty days to pay.

What is the length of Cranston's billing cycle under this new policy?

In dollars, how much would the policy have cost Cranston in 20x5?

If this policy had been in effect for 20x5, how many days would Cranston have shortened the cash conversion cycle?