When the Johnson Corporation buys inventory, it must often rely on short-term bank financing to pay for
the goods. Bank financing is usually in the form of a short-term self-liquidating loan, where the amount
outstanding increases when goods are paid for and decreases when cash is received from sales.
Coppers bank charges interest at prime (7%) plus 1%.
Consider the following example:
01-Nov	01-Dec	30-Jan	15-Mar
Buy inventory	Pay supplier /	Sell goods	Collect receivables,
for $10,000	borrow $10,000	for $20,000	$20,000, and repay
			loan, $10,000
Consider the following example:
Johnson buys and receives $10,000 worth of inventory on November 1.
The suppliers invoice is due on December 1.
Johnson expects to sell the goods about January 30, say for $20,000.
Johnson expects to receive the cash about March 15.
Accordingly, Johnson would borrow $10,000 on December 1 in order to pay the supplier. It would
repay the loan on March 15, when the cash becomes available
Required:
a. What is the inventory holding period?
b. What is the receivables collection period?
c. What is the operating cycle?
d. What is the payables payment period?
e. What is the cash conversion cycle?
f. Calculate Copper interest expense in this situation.
g. Explain 3 ways in which Cooper can reduce its interest charges with better management of its operating cycle