Suppose your startup has $18.00 million in sales, $5.00 million of inventories, $4.50 million of receivables, and $1.25 million of payables. Y cost of goods sold is 50% of sales, and you borrow funds to finance your operations at 7%. What is the formula for the cash conversion cycle? Cash conversion cycle Inventory conversion period Average collection period Payables deferral period Identify how each period is estimated. Period Formula Jentory Inventory conversion period Average collection period Payables deferral period Complete the following table by computing all periods and the cash conversion cycle. Days Inventory conversion period 202.78 Average collection period 91.25 Inventory conversion period Days 202.78 Average collection period 91.25 Payables deferral period 50.69 Cash conversion cycle 243.34 Suppose now that you were able to lower your inventories and receivables by 9% and at the same time increase payables by 9% without changing your sales and costs. The firm's cash conversion cycle became 243.34 days. You were able to free up in cash and your pre-tax profits will Step 3: Practice: Cash Conversion Cycle Now it's time for you to practice what you've learned. Suppose your startup has $10.00 million in sales, $5.00 million of inventories, $4.50 million of receivables, and $1.25 million of payables. Your cost of goods sold is 50% of sales, and you borrow funds to finance your operations at 7%. The startup's cash conversion cycle is days. Suppose now that you were able to lower your inventories and receivables by 15% and at the same time increase payables by 15%. Given that your sales and costs have not changed, your startup's cash conversion cycle became days. As a result of the 15% change in inventories, receivable and payables, you were able to free up, in cash and your pre-tax profits will by Inventory conversion period Days 202.78 Average collection period 91.25 Payables deferral period 50.69 Cash conversion cycle 243.34 Suppose now that you were able to lower your inventories and receivables by 9% and at the same time increase payables b changing your sales and costs. The firm's cash conversion cycle became 243.34 days. You were able to free up in cash and your pre-tax profits will Step 3: Practice: Cash C $187,500 Cycle $675,000 Now it's time for you to p you've learned. $750,000 Suppose your startup ha cost of goods sold is 50% $967,500 ion in sales, $5.00 million of inventories, $4.50 million of receivables, and $1.25 million d you borrow funds to finance your operations at 7%. The startup's cash conversion cycle is days. Suppose now that you were able to lower your inventories and receivables by 15% and at the same time increase payables b your sales and costs have not changed, your startup's cash conversion cycle became_ As a result of the 15% change in inventories, receivable and payables, you were able to free up days. in cash an will by Days Inventory conversion period 202.78 Average collection period 91.25 Payables deferral period 50.69 Cash conversion cycle 243.34 Suppose now that you were able to lower your inventories and receivables by 9% and at the same time increase payables by 9% changing your sales and costs. The firm's cash conversion cycle became 243.34 days. You were able to free up in cash and your pre-tax profits will Step 3: Practice: Cash Conversion Cycle decrease increase by Now it's time for you to practice what you've learned. Suppose your startup has $18.00 million in sales, $5.00 million of inventories, $4.50 million of receivables, and $1.25 million of pa cost of goods sold is 50% of sales, and you borrow funds to finance your operations at 7%. The startup's cash conversion cycle is days. Suppose now that you were able to lower your inventories and receivables by 15% and at the same time increase payables by 15% your sales and costs have not changed, your startup's cash conversion cycle became days. As a result of the 15% change in inventories, receivable and payables, you were able to free up in cash and you will by Inventory conversion period Days 202.78 Average collection period 91.25 Payables deferral period 50.69 Cash conversion cycle 243.34 Suppose now that you were able to lower your inventories and receivables by 9% and at the same time increase payables by 9% changing your sales and costs. The firm's cash conversion cycle became 243.34 days. You were able to free up In cash and your pre-tax profits will by $67,725 Step 3: Practice: Cash Conversion Cycle $675,000 Now it's time for you to practice what you've learned. $750,000 Suppose your startup has $18.00 million in sales, $5.00 million of inventories, $4.50 million of r cost of goods sold is 50% of sales, and you borrow funds to finance your operations at 7%. $1.25 million of $1,612,500 The startup's cash conversion cycle is days. Suppose now that you were able to lower your inventories and receivables by 15% and at the same time increase payables by 15 your sales and costs have not changed, your startup's cash conversion cycle became As a result of the 15% change in inventories, receivable and payables, you were able to free up days. in cash and yo will by