Zervos Inc. had the following data for 2008 (in millions). The new CFO beli - 25925

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  • Posted on: Tue 24 Sep, 2013
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Zervos Inc. had the following data for 2008 (in millions). The new CFO believes (a) that an improved inventory management system could lower the average inventory by $4,000, (b) that improvements in the credit department could reduce receivables by $2,000, and (c) that the purchasing department could negotiate better credit terms and thereby increase accounts payable by $2,000. Furthermore, she thinks that these changes would not affect either sales or the costs of goods sold. If these changes were made, by how many days would the cash conversion cycle be lowered?

  Original Revised
Annual sales: unchanged 
Cost of goods sold: unchanged 
Average inventory: lowered by $4,000 
Average receivables: lowered by $2,000 
Average payables: increased by $2,000 
Days in year
$110,000 
$80,000 
$20,000 
$16,000 
$10,000 
365
$110,000 
$80,000 
$16,000 
$14,000 
$12,000 
365

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zervos_inc_cash_conversion_cycle_.docx
zervos_inc_cash...