Multiple changes in cash conversion cycle Garrett Industries turns over its inventory 6 times each year; it has an average collection period of 41 days and anaverage payment period of 27 days. The firm's annual sales are $3.5 million. Assume there is no difference in the investment per dollar of sales in inventory,receivables, and payables; and a 365-day year.a. Calculate the firm's cash conversion cycle, its daily cash operating expenditure, and the amount of resources needed to support its cash conversion cycle.b. Find the firm's cash conversion cycle and resource investment requirement if it makes the following changes simultaneously.(1) Shortens the average age of inventory by 6 days.(2) Speeds the collection of accounts receivable by an average of 11 days.(3) Extends the average payment period by 11 days.c. If the firm pays 13% for its resource investment, by how much, if anything, could it increase its annual profit as a result of the changes in part b?d. If the annual cost of achieving the profit in part c is $33,000, what action would you recommend to the firm? Why?a. The firm's cash conversion cycle, CCC, isdays. (Round to the nearest whole day.)tLibraiIculatsource Enter your answer in the answer box and then click Check Answer.udyCheck Answer7partsremainingClear Allation Tools >This course (Introduction to Finance (EIN-101-D02) Distance Spring 2021) is hased on Zutter/Smart: Princinles of Managerial Finance Brief 8Re"pe here to search

Cash conversion cycle is the average time period in which the cash invested is converted back to…

Answered: a. The firm's cash conversion cycle,…

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a. The firm's cash conversion cycle, CCC, is days. (Round to the nearest whole day.)

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

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Question

Multiple changes in cash conversion cycle Garrett Industries turns over its inventory 6 times each year; it has an average collection period of 41 days and an
average payment period of 27 days. The firm's annual sales are $3.5 million. Assume there is no difference in the investment per dollar of sales in inventory,
receivables, and payables; and a 365-day year.
a. Calculate the firm's cash conversion cycle, its daily cash operating expenditure, and the amount of resources needed to support its cash conversion cycle.
b. Find the firm's cash conversion cycle and resource investment requirement if it makes the following changes simultaneously.
(1) Shortens the average age of inventory by 6 days.
(2) Speeds the collection of accounts receivable by an average of 11 days.
(3) Extends the average payment period by 11 days.
c. If the firm pays 13% for its resource investment, by how much, if anything, could it increase its annual profit as a result of the changes in part b?
d. If the annual cost of achieving the profit in part c is $33,000, what action would you recommend to the firm? Why?
a. The firm's cash conversion cycle, CCC, is
days. (Round to the nearest whole day.)
t
Librai
Iculat
source Enter your answer in the answer box and then click Check Answer.
udy
Check Answer
7
parts
remaining
Clear All
ation Tools >
This course (Introduction to Finance (EIN-101-D02) Distance Spring 2021) is hased on Zutter/Smart: Princinles of Managerial Finance Brief 8Re
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