Calculate the firms cash conversion cycle

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John Industries (Garrett Industries) turns over its inventory 6 times each year it has an average collection period of 45 days and an average payment period of 30 days the firm annual sales are 3 million assume no change in investment per dollar of sales in inventory receivable and payables: and a 365-day year

A. Calculate the firm's cash conversion cycle, its daily cash operation expenditure and the amount of resources needed to support its cash conversion cycle.

B. Find the firm cash conversion cycle and resource investment requirement if it make the following changes simultaneously 1. shorten the average age of inventory by 5 daye 2. speeds the collection of accounts receivable by an average of 10 days 3. extend the average payment period by 10 days

C. If the firm pays 13% for its resource investment n, by how much , if anything could it increase its annual profit as a result of change in part

D. If the annual cost of achieving the profit is in part c is $35, 000 what action would you recommend to the firm and why?

Reference no: EM13517024

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