ABC Company currently has a cash cycle of 165 days. The firm is considering maki
ID: 2774660 • Letter: A
Question
ABC Company currently has a cash cycle of 165 days. The firm is considering making some changes as follows: (i) decrease the inventory period by 98 days, (ii) increase the accounts receivable period by 94 days on average, and (iii) increase the accounts payable period will be decreased by 27 days. Calculate the number of days in the new cash cycle after the above changes become effective? That is, what is the new cash cycle? ABC Company currently has a cash cycle of 165 days. The firm is considering making some changes as follows: (i) decrease the inventory period by 98 days, (ii) increase the accounts receivable period by 94 days on average, and (iii) increase the accounts payable period will be decreased by 27 days. Calculate the number of days in the new cash cycle after the above changes become effective? That is, what is the new cash cycle?
Explanation / Answer
Answer: Cash cycle is = No of days of inventory days + No of accounts receivable days - No of accounts payble days
Particulars No. Of days Current Cash Cycle 165 Less: Decrease the inventory period by 98 Add: Increase the accounts receivable period by 94 Add: Decrease the accounts payble period 27 Revised Cash cycle 188