Soenen Inc. had the following data for 2012 (in millions).  The new CFO believes that the company could improve its working capital management sufficiently to bring its net working capital and cash conversion cycle up to the benchmark companies' level without affecting either sales or the costs of goods sold.  Soenen finances its net working capital with a bank loan at an 8% annual interest rate, and it uses a 365-day year.  If these changes had been made, by how much would the firm's pre-tax income have increased?     Original     Data Related CCC Benchmarks' CCC Sales $108,000     Cost of goods sold $80,000     Inventory (ICP) $20,000 91.25 38.00 Receivables (DSO) $16,000 54.07 20.00 Payables (PDP) $5,000 22.81 30.00     122.51 28.00

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
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Soenen Inc. had the following data for 2012 (in millions).  The new CFO believes that the company could improve its working capital management sufficiently to bring its net working capital and cash conversion cycle up to the benchmark companies' level without affecting either sales or the costs of goods sold.  Soenen finances its net working capital with a bank loan at an 8% annual interest rate, and it uses a 365-day year.  If these changes had been made, by how much would the firm's pre-tax income have increased?

 
 
Original
 
 
Data
Related CCC
Benchmarks' CCC
Sales
$108,000
   
Cost of goods sold
$80,000
   
Inventory (ICP)
$20,000
91.25
38.00
Receivables (DSO)
$16,000
54.07
20.00
Payables (PDP)
$5,000
22.81
30.00
   
122.51
28.00
   
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