Question
Jiffy Park Corp.has annual sales of $50,705,000, an average inventory level of $15,015,000, and average accounts receivable of $10,015,000. The firm's cost of goods sold
Jiffy Park Corp.has annual sales of $50,705,000, an average inventory level of $15,015,000, and average accounts receivable of $10,015,000. The firm's cost of goods sold is 85% of sales. The company makes all purchases on credit and has always paid on the 30th day. However, it now plans to take full advantage of trade credit and to payits suppliers on the 40th day.The CFO also believes that sales can be maintained at the existing level but inventory can be loweredby$1,950,000 and accounts receivableby$1,950,000.(6points)
a. What is Jiffy Parks cash conversion cycle (CCC) prior to the changes proposed?
b. What is Jiffy Parks CCC after implementing the suggested changes?
c. What is thenet change inJiffy Parks CCC given what you just calculated above?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started