Camp manufacturing turns over its inventory eight times, Ask an Expert

Finance

Camp Manufacturing turns over its inventory eight times each year, has an average payment period of 35 days, and has an average collection period of 60 days. The firm's annual sales are $3.5 million. Assume there is no difference in the investment per dollar of sales in inventory, receivables, and payables and that there is a 365-day year.

a. Calculate the firm's operating cycle and cash conversion cycle.

b. Calculate the firm's daily cash operating expenditure. How much in resources must be invested to support its cash conversion cycle?

c. If the firm pays 14% for these resources, by how much would it increase its annual profits by favorably changing its current cash conversion cycle by 20 days?

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