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Merry Parties Inc. carries an average inventory of $1,000,000. Its annual sales are $10 million, and...

Merry Parties Inc. carries an average inventory of $1,000,000. Its annual sales are $10 million, and its receivables conversion period is twice as long as its inventory conversion period. The firm buys on terms of net 30 days, and it pays on time. Its new CFO wants to decrease the cash conversion cycle by 10 days, based on a 365-day year. He believes he can reduce the average inventory to $895,000 with no effect on sales. By how much must the firm also reduce its accounts receivable to meet its goal of a 10-day reduction in the cash conversion cycle?

a. $168,767

b. $101,900

c. $136,986

d. $0

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jeff jeffy answered 1 year ago
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