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Barnes & Noble Inc. reported the following financial information for its last fiscal year (all numbers...

Barnes & Noble Inc. reported the following financial information for its last fiscal year (all numbers in thousands):
Revenues $6,839,005
Inventory $1,410,769
A/P $1,374,434
A/R $149,369
AAI 105.21 days
APP 100.86 days
ACP 8.52 days

For the upcoming fiscal year B&N management has set a goal for the company to reduce the average age of inventory to 90 days. What would the impact be on the CCC?

The CCC will decrease by 25.14 days

The CCC will decrease by 15.21 days

The CCC will increase by 10.41 days

The CCC will not change

Solutions

Expert Solution

Answer is “The CCC will decrease by 15.21 days”

Last Year:

Cash Conversion Cycle = AAI - APP + ACP
Cash Conversion Cycle = 105.21 days - 100.86 days + 8.52 days
Cash Conversion Cycle = 12.87 days

Next Year:

Cash Conversion Cycle = AAI - APP + ACP
Cash Conversion Cycle = 90.00 days - 100.86 days + 8.52 days
Cash Conversion Cycle = -2.34 days

Decrease in CCC = Last Year’s CCC - Next Year’s CCC
Decrease in CCC = 12.87 days - (-2.34) days
Decrease in CCC = 15.21 days

jeff jeffy answered 2 years ago
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