Question
Lopinto, Inc., an Italian sportswear manufacturer, has been given net 60-day terms by all of its suppliers. Last year, the companys sales were $8,000,000, cash
Lopinto, Inc., an Italian sportswear manufacturer, has been given net 60-day terms by all of its suppliers. Last year, the companys sales were $8,000,000, cash cost of goods sold (COGS excluding depreciation) was $4,200,000, and Lopinto paid its suppliers on time, at an average of 60 days. This year, all of Lopintos suppliers have changed their payment terms to net 45 days. Assuming that Lopinto will pay on time, and that sales and COGS will remain at the same level as last year, what effect will this change have on Lopintos financing needs? Select the option closest to your calculation.
Financing needs will decrease by approximately $328,800. Financing needs will decrease by approximately $172,600. Financing needs will increase by approximately $172,600. Financing needs will increase by approximately $328,800.
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