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What will be the net change in the cash conversion cycle, assuming a 365-day year?

What will be the net change in the cash conversion cycle, assuming a 365-day year?

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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Jude Corp. has annual sales of P50,735,000, an average inventory level of P15,012,000, and average accounts receivable of P10,008,000. The firm's cost of goods sold is 85% of sales. The company makes all purchases on credit and has always paid on the 30th day. However, it now plans to take full advantage of trade credit and to pay its suppliers on the 40th day. The CFO also believes that sales can be maintained at the existing level but inventory can be lowered by P1,946,000 and accounts receivable by P1,946,000. What will be the net change in the cash conversion cycle, assuming a 365-day year?

-32.8 days
-29.5 days
-26.6 days
-40.5 days
-36.4 days

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