Adong's Fishing Products is analyzing the performance of its cash management. On average, the firm holds inventory for 65 days, pays its suppliers in 35 days, and collects its receivables in 15 days. The firm has a current annual outlay of $1,960,000 on operating cycle investments. Adong currently pays 10 percent for its financing. (Assume a 360-day year.)
(a) Calculate the firm's cash conversion cycle.
(b) Calculate the firm's operating cycle.
(c) Calculate the daily expenditure and the firm's annual savings if the operating cycle is reduced by 15 days.

Question

Quizplus · Accepted Answer

The Answer of Adong's Fishing Products is analyzing the performance of its cash management. On average, the firm holds inventory for 65 days, pays its suppliers in 35 days, and collects its receivables in 15 days. The firm has a current annual outlay of $1,960,000 on operating cycle investments. Adong currently pays 10 percent for its financing. (Assume a 360-day year.)
(a) Calculate the firm's cash conversion cycle.
(b) Calculate the firm's operating cycle.
(c) Calculate the daily expenditure and the firm's annual savings if the operating cycle is reduced by 15 days.

Adong's Fishing Products Is Analyzing the Performance of Its Cash