Question $(4)$

Lucarelli, Inc., an Italian sportswear manufacturer, has been given net $60-$day terms by all its suppliers. Last year, the company purchased $$4,200,000$ of inventory and paid its trade at an average of $60$ days. A major supplier that provides $30\%$ of Lucarelli's material has changed its terms to net $45$ days. Assuming purchases remain the same this year and Lucarelli agrees to pay on these new terms, what effect will this change have on Lucarelli's financing needs? $($Use purchases in place of cost of goods sold in your calculation.$)$

Financing needs will decrease by approximately $$52,000.$

Financing needs will decrease by approximately $$173,000$

Financing needs will increase by approximately $$52,000.$