Lolla Inc. currently has $875,000 in accounts receivable, $675,500 in inventories and $875,000 in accounts payable on its balance sheet. The firms production manager has determined that cost of goods sold (COGS) are 80% of the annual sales revenue produced, totaling $6,250,000. Lolla production manager has determined that through negotiations with its suppliers, the firm could reduce their COGS sold down to 70%, and thus reduce its cash conversion cycle time.

1. Calculate the CCC for Lolla Inc. before the reduction in COGS.

2. What is the new CCC for Lolla Inc. after the reduction in COGS?

3. To enjoy this reduction in COG sold, Lolla suppliers will require that Maestro pay them a bit more promptly. If Lolla begins paying its bills quicker and is able to reduce their PDP by 25 days, what will their payables balance be?