Margetis Inc

question 81

Multiple Choice

Margetis Inc. carries an average inventory of $750,000. Its annual sales are $10 million, its cost of goods sold is 75% of annual sales, and its average collection period is twice as long as its inventory conversion period. The firm buys on terms of net 30 days, and it pays on time. Its new CFO wants to decrease the cash conversion cycle by 10 days, based on a 365-day year. He believes he can reduce the average inventory to $647,260 with no effect on sales. By how much must the firm also reduce its accounts receivable to meet its goal in the reduction of the cash conversion cycle?

• A) $123,630
• B) $130,137
• C) $136,986
• D) $143,836
• E) $151,027

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Definitions:

Defects Measurement

The process of identifying, quantifying, and analyzing defects in products or services to improve quality and customer satisfaction.

Buyer-supplier Network

A system of organizations, people, technology, activities, information, and resources involved in moving a product or service from supplier to buyer.

Informal System

A network or process within an organization that is not officially sanctioned but emerges from the relationships and social networks among employees.

Current Sources

The existing suppliers or providers from which a company obtains products, services, or information.