Explore BrainMass
Share

Explore BrainMass

    Cash Conversion Cycles for Edison Inc.

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    Edison Inc. has annual sales of $49,000,000, or $44,100,000 a day on a 365-day basis. The firm's cost of goods sold are 75% of sales. On average, the company has $9,000,000 in inventory and $8,000,000 in accounts receivable. The firm is looking for ways to shorten its cash conversion cycle. Its CFO has proposed new policies that would result in a 20% reduction in both average inventories and accounts receivable. She also anticipates that these policies would reduce sales by 10%, while the payables deferral period would remain unchanged at 35 days. What effect would these policies have on the company's cash conversion cycle? Round to the nearest whole day.

    © BrainMass Inc. brainmass.com October 10, 2019, 2:44 am ad1c9bdddf
    https://brainmass.com/business/management-accounting/cash-conversion-cycles-edison-391977

    Solution Preview

    Please see the attached file for better format.

    Cash Conversion Cycles
    Edison Inc. has annual sales of $49,000,000, or $44,100,000 a day on a 365-day basis. The firm's cost of goods sold are 75% of sales. On average, the company has $9,000,000 in inventory and $8,000,000 in accounts receivable. The firm is looking for ways to shorten its cash conversion cycle.

    Its CFO has proposed new policies that would result in a 20% reduction in both average inventories and accounts receivable. She also anticipates that these policies ...

    Solution Summary

    The solution discusses cash conversion cycles for Edison Inc.

    $2.19