Question
Table 3 provides the most recent financial values for Firm Z. The CFO wants to implement strategic and operational changes that will lower the firms
Table 3 provides the most recent financial values for Firm Z. The CFO wants to implement strategic and operational changes that will lower the firms DSO to 40 days, DIH to 35 days, and increase DPO to 50 days. Assuming that these changes can be met without reducing revenues or CGS, calculate the resulting increase in operating cash flow due to reducing the CCC. Lastly, discuss any weaknesses in the model assumptions that might result in the projected increase in operating cash flow not materializing.
Table 3
| Most Recent Values for Firm Z |
Accounts Receivable | $51 |
Inventory | $17 |
Accounts Payable | $13 |
Revenues | $150 |
CGS | $122 |
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