Problemedison inc has annual sales of 36500000 or 100000 a, Ask an Expert

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Edison Inc. has annual sales of $36,500,000, or $100,000 a day on a 365-day basis. The firm's cost of goods sold is 75% of sales. On average, the company has $9,000,000 in inventory and $8,000,000 in accounts receivable. The firm is looking for ways to shorten its cash conversion cycle. Its CFO has proposed new policies that would result in a 20% reduction in both average inventories and accounts receivable. She also anticipates that these policies would reduce sales by 10%, while the payables deferral period would remain unchanged at 35 days.

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Question: What effect would these policies have on the company's cash conversion cycle?

Note: Provide specific examples to support your answers.

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M91169852

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