Question
Tulus incorporated has annual sales of RM36,500,000 (RM100,000 a day on a 365-day basis). On average, the company has RM12,000,000 in inventory and RM8,000,000 in
Tulus incorporated has annual sales of RM36,500,000 (RM100,000 a day on a 365-day
basis). On average, the company has RM12,000,000 in inventory and RM8,000,000 in
accounts receivable. The company is looking for ways to shorten its cash conversion cycle,
which is calculated on a 365-day basis. Its CFO has proposed new policies that would
result in a 20 percent reduction in both average inventories and accounts receivables. The
company anticipates that these policies will also reduce sales by 10 percent. Accounts
payable will remain unchanged. What effect would these policies have on the company's
cash conversion cycle (CCC). (Show the calculation).
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