Question
Network Solutions just introduced anew, fully automated manufacturing plant that produces 2,000 wireless routers per day with materials costs of $50 per router and no
Network Solutions just introduced anew, fully automated manufacturing plant that produces 2,000
wireless routers per day with materials costs of $50 per router and no other costs. The average number of days a router is held in inventory before being sold is 45 days. Inaddition, they generally pay their suppliers in 30 days, while collecting from their customers after 25 days.
a. What is the cash conversioncycle?
b. What would happen to the cash conversion cycle if they could stretch their payments to suppliers from 30 days to 50 days?
c. How much would working capital be reduced if they stretched their payments to suppliers from
30 days to 50 days?
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