Chapter 15, Problem 15.2P

Learning Goal 2

P15-2 Changing cash conversion cycle Camp Manufacturing turns over its inventory 5 times each year, has an average payment period of 35 days, and has an average collection period of 60 days. The firm has annual sales of $3.5 million and cost of goods sold of $2.4 million.

1. a. Calculate the firm’s operating cycle and cash conversion cycle.
2. b. What is the dollar value of inventory held by the firm?
3. 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?