Kiley Corporation had the following data for the most recent year (in millions).The new CFO believes (1) that an improved inventory management system could lower the average inventory by $4,000, (2) that improvements in the credit department could reduce receivables by $2,000, and (3) that the purchasing department could negotiate better credit terms and thereby increase accounts payable by $2,000.Furthermore, she thinks that these changes would not affect either sales or the costs of goods sold.If these changes were made, by how many days would the cash conversion cycle be lowered?

\begin{array}{lrr}&\text { Original } & \text { Revised } \\\text { Annual sales: unchanged } & \$ 110,000 & \$ 110,000 \\\text { Cost of goods sold: unchanged } & \$ 80,000 & \$ 80,000 \\\text { Average inventory: lowered by } \$ 4,000 & \$ 20,000 & \$ 16,000 \\\text { Average receivables: lowered by } \$ 2,000 & \$ 16,000 & \$ 14,000 \\\text { Average payables: increased by } \$ 2,000 & \$ 10,000 & \$ 12,000 \\\text { Days in year } & 365 & 365\end{array}

A) 34.0
B) 37.4
C) 41.2
D) 45.3
E) 49.8

The Longer Its Customers Normally Hold Inventory, the Longer the Credit

True/False

Correct Answer:VerifiedUnlock this answer nowGet Access to more Verified Answers free of chargeAccess For Free

Correct Answer:
Verified
Unlock this answer now
Get Access to more Verified Answers free of charge