The Depot, is a local restaurant, coffee shop and bookstore in the heart of Mill Valley, California. The company turns over its inventory 8 times a year has an average payment period of 35 days and an average collection period of 20 days. The company has annual sales of $3.5 million. Assume there is no difference in the investment per dollar of sales in inventory, receivables, and payables and there are 365 days in the year.

Problem1: Calculate the firm's daily cash operating expenditure. How much in resources must be invested to support the cash conversion cycle?

Problem2: If the firm pays 14% for these resources, by how much would it increase its annual profits by favourably changing its current cash conversion cycle by 5 days.