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a recommendation to the firm, assuming that it has a 12% opportunity cost. Assessing Roche Publishing Company’s
Cash Management Efficiency L isa Pinto, vice president of finance at Roche Publishing Company, a rapidly
growing publisher of college texts, is concerned about the firm’s high level
of short-term resource investment. She believes that the firm can improve the
management of its cash and, as a result, reduce this investment. In this regard,
she charged Arlene Bessenoff, the treasurer, with assessing the firm’s cash management efficiency. Arlene decided to begin her investigation by studying the
firm’s operating and cash conversion cycles.
Arlene found that Roche’s average payment period was 25 days. She consulted industry data, which showed that the average payment period for the
industry was 40 days. Investigation of three similar publishing companies
revealed that their average payment period was also 40 days. She estimated the
annual cost of achieving a 40-day payment period to be...
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