Question
Parramore Corp has $14 million of sales, $2 million of inventories, $3 million of receivables, and $1 million of payables. Its cost of goods sold
Parramore Corp has $14 million of sales, $2 million of inventories, $3 million of receivables, and $1 million of payables. Its cost of goods sold is 65% of sales, and it finances working capital with bank loans at an 9% rate. Assume 365 days in year for your calculations. Do not round intermediate steps.
Parramore's cash conversion cycle (CCC)?
If Parramore could lower its inventories and receivables by 12% each and increase its payables by 12%, all without affecting sales or cost of goods sold, what would be the new CCC?
How much cash would be freed up, if Parramore could lower its inventories and receivables by 12% each and increase its payables by 12%, all without affecting sales or cost of goods sold?
By how much would pretax profits change, if Parramore could lower its inventories and receivables by 12% each and increase its payables by 12%, all without affecting sales or cost of goods sold?
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