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Qes. 1 Multiple changes in cash conversion cycle Garrett Industries turns over its inventory 5 times each year; it has an average collection period of
Qes. 1
Multiple changes in cash conversion cycle Garrett Industries turns over its inventory 5 times each year; it has an average collection period of 44 days and an average payment period of 26 days. The rm's annual sales are $2.9 million. Assume there is no difference in the investment per dollar of sales in inventory, receivables, and payables; and a 365-day year. a. Calculate the rm's cash conversion cycle, its daily cash operating expenditure, and the amount of resources needed to support its cash conversion cycle. b. Find the rm's cash conversion cycle and resource investment requirement if it makes the following changes simultaneously, (1) Shortens the average age of inventory by 3 days. (2) Speeds lhe collection of accounts receivable by an average of 8 days. (3) Extends the average payment period by 8 days. c. If the rm pays 11% for its resource investment, by how much, if anything, could it increase its annual prot as a result of the changes in part b? d. If the annual cost of achieving the prot in part c is $35,000, what action would you recommend to the rm? Why? a. The nn's cash conversion cycle, CCC, is days. (Round to the nearest whole day.)Step by Step Solution
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