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Unformatted text preview: = $119,700 Quantity Discount and Safety Stocks : Average Inventory = (25,000/2) + 2,000 = 14,500 units New TIC = (14,500)($3.60)(.10) + ($150)(12) New TIC = $5,220 + $1,800 = $7,020 18. Assume that your company has sales (all on credit) of $1,000,000 a day on a 360-day basis year. On average, the company has an account receivable turnover of 6, an inventory turnover of 12, and a payables deferral period of 10 days. The company is looking for ways to shorten its cash conversion cycle (calculated on a 360-day basis). The CFO has proposed new policies that would result in a 30 percent reduction in both average inventories and accounts receivables outstanding, and a lengthening of the payables deferral period to 30 days. The company anticipates that these policies will also reduce sales to $975,000 per day. Given this information, determine by how many days these changes will shorten the company's cash conversion cycle....
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This note was uploaded on 07/13/2011 for the course FIN 4414 taught by Professor Staff during the Spring '08 term at University of Florida.
- Spring '08