A firm currently has a 40-day cash cycle. Assumethat the firm changes its operations such that itdecreases its receivables period by 5 days,increases its inventory period by 3 days, anddecreases its payables period by 2 days. Whatwill the length of the cash cycle be after thesechanges?

Step 1: Definition of Cash CycleThe cash cycle (also known as the cash conversion cycle) is the time…

Answered: A firm currently has a 40-day cash…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter17: The Management Of Cash And Marketable Securities

Section: Chapter Questions

Problem 2P

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A firm currently has a 40-day cash cycle. Assume that the firm changes its operations such that it decreases its receivables period by 5 days, increases its inventory period by 3 days, and decreases its payables period by 2 days. What will the length of the cash cycle be after these changes?