Berry Manufacturing turns over its inventory 8 times each year, has an Average Payment Period of 35 days and has an Average Collection Period of 60 days. The firm’s annual sales are $3.5 million. Assume there is no difference in the investment per dollar of sales in inventory, receivable, and payables and that there is a 365-day year. A. How much resources must be invested to support its Cash Conversion Cycle? B. If the firm pays 14% for these resources, by how much would it increase its annual profits by favorably changing its Current Cash Conversion Cycle by 20 days.

Berry Manufacturing turns over its inventory 8 times each year, has an Average Payment Period of 35 days and has an Average Collection Period of 60 days. The firm’s annual sales are $3.5 million. Assume there is no difference in the investment per dollar of sales in inventory, receivable, and payables and that there is a 365-day year. A. How much resources must be invested to support its Cash Conversion Cycle? B. If the firm pays 14% for these resources, by how much would it increase its annual profits by favorably changing its Current Cash Conversion Cycle by 20 days.

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter21: Supply Chains And Working Capital Management

Section: Chapter Questions

Problem 11P: Negus Enterprises has an inventory conversion period of 50 days, an average collection period of 35...

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