Whitson Co

question 19

Multiple Choice

Whitson Co.is looking for ways to shorten its cash conversion cycle.It has annual sales of $36,500,000, or $100,000 a day on a 365-day basis.The firm's cost of goods sold is 75% of sales.On average, the company has $9,000,000 in inventory and $8,000,000 in accounts receivable.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.

• A) −26 days
• B) −22 days
• C) −18 days
• D) −14 days
• E) −11 days

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Definitions:

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Precipitation falling from clouds in the form of ice crystals, accumulating on the ground.

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The arithmetic average of a set of values, found by adding all numbers in the set and then dividing by the count of those numbers.

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A measure that is used to quantify the amount of variation or dispersion of a set of values.

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