Question 3 Fishing Products Limited is analysing the performance of its cash management. On average, the firm holds inventory 45 days, pays its suppliers in 25 days, and collects its receivables in 20 days. The firm has a current annual outlay of $10,800,000 on operating cycle investments. The company currently pays 10 per cent for its negotiated financing. (Assume a 360-day year.)

Required: Calculate: i.) the firms cash conversion cycle. [2 marks]

ii.) the firms operating cycle. [1 mark]

iii.) the daily expenditure and the firms annual savings if the operating cycle is reduced by 15 days. [2 marks