A Firm Has a Cash Conversion Cycle of 60 Days

question 225

Multiple Choice

A firm has a cash conversion cycle of 60 days. Annual outlays are $12 million and the cost of negotiated financing is 12 percent. If the firm reduces its average age of inventory by 10 days, the annual savings is __________.

• A) $144,000
• B) $104,000
• C) $40,000
• D) $28,800

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Definitions:

Market Transactions

The buying and selling activities that take place in the marketplace between buyers and sellers.

Cooperation

The process of groups or individuals working together towards a common goal, often leading to mutual benefits.

Better Products

This denotes products that are considered superior in quality or performance compared to others.

Dictator Game

An experimental game in economics and psychology where one participant, the "dictator," determines how to split an endowment between themselves and another participant.