Can you demonstrate the accurate method for solving this General accounting question? A company is considering implementing several operationalchanges to boost its business. These changes include increasingthe inventory of raw materials by $40,000, offering more flexiblepayment terms to customers, which will increase receivables by$120,000, and negotiating more favorable credit terms withsuppliers, leading to an increase in payables by $60,000. Theseactions are expected to increase annual sales by $1,200,000. Thecompany expects its cost of goods sold (COGS) to remain at 65%of sales.What effect will these changes have on the company's cashconversion cycle (CCC)?

Step 1: Define Cash Conversion Cycle (CCC)The Cash Conversion Cycle (CCC) measures the number of…

Answered: A company is considering implementing…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter16: Working Capital Policy And Short-term Financing

Section: Chapter Questions

Problem 13P

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A firm is considering several policy changes to increase sales. It will increase the variety of goods it keeps in inventory, but this will increase inventory by $12,000. It will offer more liberal sales terms, but this will result in average receivables increasing by $69,000. These actions are expected to increase sales by $820,000 per year, and cost of goods will remain at 80% of sales. Because of the firm’s increased purchases for its own production needs, average payables will increase by $37,000. What effect will these changes have on the firm’s cash cycle? (Use 365 days in a year. Do not round your intermediate calculations. Round your answer to 2 decimal places.) Change in cash cycle days
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HiTech Electronics manufactures two new products, Tablets and Touch Screen Remotes, and sells them nationally to wholesalers and retailers. The HiTech management is very pleased with the company’s performance for the current fiscal year. Projected sales through December 31, 2022, indicate that 70,000 Tablets and 140,000 Remotes will be sold this year. The projected earnings statement, which appears below, shows that HiTech will exceed its earnings goal of 9 percent on sales after taxes. The Tablet business has been fairly stable for the last few years, and the company does not intend to change the Tablet price. However, the competition among manufacturers of Touch Screen Remotes has been increasing. HiTech’s Remotes have been very popular with consumers.In order to sustain this interest in their Remotes and to meet the price reductions expected from competitors, management has decided to reduce the wholesale price of its calculator from $22.50 to $20.00 per unit effective January 1,…

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