Kolan Inc Has Annual Sales of $36,500,000 ($100,000 a Day on on a 365-Day

question 57

Multiple Choice

Kolan Inc. has annual sales of $36,500,000 ($100,000 a day on a 365-day basis) . On average, the company has $12,000,000 in inventory and $8,000,000 in accounts receivable. The company is looking for ways to shorten its cash conversion cycle, which is calculated on a 365-day basis. Its CFO has proposed new policies that would result in a 20 percent reduction in both average inventories and accounts receivables. The company anticipates that these policies will also reduce sales by 10 percent. Accounts payable will remain unchanged. What effect would these policies have on the company's cash conversion cycle? Round to the nearest whole day.

• A) -40 days
• B) -22 days
• C) -13 days
• D) +22 days
• E) +40 days

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