On Shin Inc

question 63

Multiple Choice

on Shin Inc.for 2008 are shown below, along with the inventory conversion period (ICP) of the firms against which it benchmarks.The firm's new CFO believes that the company could reduce its inventory enough to reduce its ICP to the benchmarks' average.If this were done, by how much would inventories decline? Use a 365-day year.
Cost of goods sold =$85,000
Inventory =$20,000
Inventory conversion period (ICP) =85.88
Benchmark inventory conversion period (ICP) =38.00

• A)$ 7,316
• B)$ 8,129
• C)$ 9,032
• D)$10,036
• E)$11,151

---

Definitions:

Annuity

is a financial product that pays out a fixed stream of payments to an individual, typically used as an income stream for retirees.

Compound Interest

Interest calculated on the initial principal as well as on the accumulated interest of previous periods of a deposit or loan.

Present Value

The value at present of future cash earnings or accumulations of money, determined by applying a pre-specified rate of financial return.

Current Liability

A company's debts or obligations that are due within one year.