Rosanna Corp. has P15million of sales; P2million of inventories; P3million of receivables and P1million of payable. Its cost of sales is 80% of sales, and it finance working capital with bank loans at an 8% rate.What is Rosanna’s cash conversion cycle?If Rosanna could lower its inventories and receivables by 10% each, and increase its payable by 10%, all without affecting sales or cost of sales, what would be the new Cash conversion cycle?Following number 2 above, how much cash would be freed up?

The cash conversion cycle (CCC) is a financial metric that measures the time it takes for a company…

Answered: Rosanna Corp. has P15million of sales;…

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter22: Providing And Obtaining Credit

Section: Chapter Questions

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Rosanna Corp. has P15million of sales; P2million of inventories; P3million of receivables and P1million of payable. Its cost of sales is 80% of sales, and it finance working capital with bank loans at an 8% rate.

What is Rosanna’s cash conversion cycle?
If Rosanna could lower its inventories and receivables by 10% each, and increase its payable by 10%, all without affecting sales or cost of sales, what would be the new Cash conversion cycle?
Following number 2 above, how much cash would be freed up?

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(i) Inventory = (60.83 – 54.75) ´ $32,876.7123 = $199,890.41.

(ii) Receivables = (73 – 65.70) ´ $41,095.8904 = $300,000.

(iii) Payables = (33.46 – 30.42) ´ $32,876.7123 = $99,945.21

How did you compute the $32,876.7123 for inventory, $41,095.8904 for receivables, and $32,876.7123 for payables?

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