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Whitson Co. is looking for ways to shorten its cash conversion cycle. It has annual sales of R36,500,000, or R100,000 a day on a 365-day
Whitson Co. is looking for ways to shorten its cash conversion cycle. It has annual sales of R36,500,000, or R100,000 a day on a 365-day basis. The firm's cost of goods sold is 74% of sales. On average, the company has R9363993 in inventory and R7114197 in accounts receivable. Its CFO has proposed new policies that would result in a 21% reduction in both average and accounts inventories receivable. She also anticipates that these policies would reduce sales by 10%, while the payables deferral period would remain unchanged at 35 days. All sales are on credit. Required: a) What is the cash conversion cycle before implementing the changes? days b) What is the cash conversion cycle after implementing the changes? days 2
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