Inova Co. has recorded annual sales of RM25,000,000 in year 2018 with 30% of the sales revenues is on credit. The costs of gold sold of the company is equal to 70% of sales revenues in year 2018. In addition, the company has accounts payable of RM3,500,000, and the company turn overs its inventories 10 times a year. The company is operating under a 360-day business year. (i) Compute the cash conversion cycle (CCC) of Inova Co. (ii) Inova Co. is now keen to speed up its inventory turnover and shorten the average collection period. As a result, the inventory turnover increases to 12 times and the accounts receivable are 25% lower than its previous level. Compute the new CCC of Inova Co. after these changes.
Inova Co. has recorded annual sales of RM25,000,000 in year 2018 with 30% of the sales revenues is on credit. The costs of gold sold of the company is equal to 70% of sales revenues in year 2018. In addition, the company has accounts payable of RM3,500,000, and the company turn overs its inventories 10 times a year. The company is operating under a 360-day business year. (i) Compute the cash conversion cycle (CCC) of Inova Co. (ii) Inova Co. is now keen to speed up its inventory turnover and shorten the average collection period. As a result, the inventory turnover increases to 12 times and the accounts receivable are 25% lower than its previous level. Compute the new CCC of Inova Co. after these changes.
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 12P: Strickler Technology is considering changes in its working capital policies to improve its cash flow...
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Inova Co. has recorded annual sales of RM25,000,000 in year 2018 with 30% of the sales revenues is on credit. The costs of gold sold of the company is equal to 70% of sales revenues in year 2018. In addition, the company has accounts payable of RM3,500,000, and the company turn overs its inventories 10 times a year. The company is operating under a 360-day business year.
(i) Compute the cash conversion cycle (CCC) of Inova Co.
(ii) Inova Co. is now keen to speed up its inventory turnover and shorten the average collection period. As a result, the inventory turnover increases to 12 times and the accounts receivable are 25% lower than its previous level. Compute the new CCC of Inova Co. after these changes.
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