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Changing cash conversion cycle Cam each year, has an average payment perio of 68 days. The firm has annual sales of

Changing cash conversion cycle Cam each year, has an average payment perio of 68 days. The firm has annual sales of

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Changing cash conversion cycle Camp Manufacturing turns over its inventory 5 times each year, has an average payment period of 36 days, and has an average collection period of 68 days. The firm has annual sales of $3.3 million and cost of goods sold of $2.2 million. (Use a 365-day year.) a. Calculate the firm's operating cycle and cash conversion cycle. b. What is the dollar value of inventory held by the firm? c. If the firm could reduce the average age of its inventory from 73 days to 63 days, by how much would it reduce its dollar investment in working capital?
Transcribed Image Text:Changing cash conversion cycle Camp Manufacturing turns over its inventory 5 times each year, has an average payment period of 36 days, and has an average collection period of 68 days. The firm has annual sales of $3.3 million and cost of goods sold of $2.2 million. (Use a 365-day year.) a. Calculate the firm's operating cycle and cash conversion cycle. b. What is the dollar value of inventory held by the firm? c. If the firm could reduce the average age of its inventory from 73 days to 63 days, by how much would it reduce its dollar investment in working capital?
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