problem: Sunaty Calendar Company is examining the performance of its cash management department. The firm has inventory which turns 7.2 times per year, an average pay period of 40 days, & an average collection period of sixty days. The firm’s total annual outlays are $2,500,000. [Suppose a 365-day year.]
[A] Compute the amount of resources needed to support the firm’s cash conversion cycle.
[B] Compute the firm’s operating & cash conversion cycles.
[C] The firm is considering speeding the collection of accounts receivable by using lockboxes. The lockboxes would reduce the average collection period by four days and cost 2,000 dollar in fees. If the firm can earn 9 percent on its short-term investments, determine the recommendation would you make to the firm regarding the lockbox system?