Jiffy Park Corp. has annual sales of $51,705,000, an average inventory level of $15,125,000, and average accounts receivable of $10,125,000. The firm's cost of goods sold is 85% of sales. The company makes all purchases on credit and has always paid on the 30th day. However, it now plans to take full advantage of trade credit and to pay its suppliers on the 40th day. The CFO also believes that sales can be maintained at the existing level, but inventory can be lowered by $1,950,000 and accounts receivable by $1,950,000. 1. What is Jiffy Park's cash conversion cycle (CCC) prior to the changes proposed? 2. What is Jiffy Park's CCC after implementing the suggested changes? 3. What is the net change in Jiffy Park's CCC given what you just calculated above?
Jiffy Park Corp. has annual sales of $51,705,000, an average inventory level of $15,125,000, and average accounts receivable of $10,125,000. The firm's cost of goods sold is 85% of sales. The company makes all purchases on credit and has always paid on the 30th day. However, it now plans to take full advantage of trade credit and to pay its suppliers on the 40th day. The CFO also believes that sales can be maintained at the existing level, but inventory can be lowered by $1,950,000 and accounts receivable by $1,950,000. 1. What is Jiffy Park's cash conversion cycle (CCC) prior to the changes proposed? 2. What is Jiffy Park's CCC after implementing the suggested changes? 3. What is the net change in Jiffy Park's CCC given what you just calculated above?
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
Section: Chapter Questions
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Transcribed Image Text:Jiffy Park Corp. has annual sales of $51,705,000, an average inventory level of $15,125,000, and
average accounts receivable of $10,125,000. The firm's cost of goods sold is 85% of sales. The
company makes all purchases on credit and has always paid on the 30th day. However, it now plans
to take full advantage of trade credit and to pay its suppliers on the 40th day. The CFO also believes
that sales can be maintained at the existing level, but inventory can be lowered by $1,950,000 and
accounts receivable by $1,950,000.
1. What is Jiffy Park's cash conversion cycle (CCC) prior to the changes proposed?
2. What is Jiffy Park's CCC after implementing the suggested changes?
3. What is the net change in Jiffy Park's CCC given what you just calculated above?
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