How much cash would be freed-up

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Reference no: EM13287209

Smith Corp has:

$13 million of sales
$2 million of inventories
$3 million of receivables
$2 million of payables

Its cost of goods sold is 75% of sales, and it finances working capital with bank loans at an 8% rate. Assume 365 days in year for your calculations. Do not round intermediate steps. Smith's cash conversion cycle (CCC) 84.23 Days

1. If Smith Corp could lower its inventories and receivables by 9% each and increase its payables by 9%, all without affecting sales or cost of goods sold, what would be the new CCC? Round your answer to two decimal places.

2. How much cash would be freed-up? Round your answer to the nearest cent.

By how much would pre-tax profits change? Round your answer to the nearest cent.

 

Reference no: EM13287209

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