Table 1 provides historical and projected financial statement values for Firm X (a firm that you work for as a treasury analyst).

	Firm X: Most Recent Year	Firm X: Forecasted Value for Next Year	Best in Industry: Targets for Next Year
Accounts Receivable as a % of Revenues	15%	15%	10%
Inventory as a % of Revenues	20%	15%	10%
Accounts Payable as a % of Revenues	10%	15%	20%
Revenues	$200M	$210M	$350M
Depreciation Expense	$15M	$15M	n/a
Net Income	$50M	$55M	$90M

Question 1: Estimate Firm Xs Operating Cash Flow for next year using the forecasted values in the middle column.

Question 2: Estimate Firm Xs Operating Cash Flow for the next year assuming that management can implement strategic changes to working capital policy so as to achieve the Best in Industry Targets given in the last column of Table 1.

Question 3: After presenting both estimates to Firm Xs treasury manager, the treasury manager exclaims Wow, I cant believe that we can improve Operating Cash Flow by adhering to the Best-in Industry targets. How would you explain to the treasury manager why your second estimate of Operating Cash Flow is so much larger than the first estimate?

Question 4: What was Firm Xs cash conversion cycle in the most recent year?