Pascarella Inc

question 11

Multiple Choice

Pascarella Inc.is revising its payables policy.It has annual sales of $50,735,000, an average inventory level of $15,012,000, and average accounts receivable of $10,008,000.The firm's cost of goods sold is 85% of sales.The company makes all purchases on credit and has always paid on the 30th day.However, it now plans to take full advantage of trade credit and to pay its suppliers on the 40th day.The CFO also believes that sales can be maintained at the existing level but inventory can be lowered by $1,946,000 and accounts receivable by $1,946,000.What will be the net change in the cash conversion cycle, assuming a 365-day year?

• A) −26.6 days
• B) −29.5 days
• C) −32.8 days
• D) −36.4 days
• E) −40.5 days

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Definitions:

Buttermilk

A slightly sour liquid left after butter has been churned, used in baking or consumed as a drink.

Shelf

A flat, horizontal surface or board designed for the storage and display of items.

Presupposed Conditions

Implicit assumptions or prerequisites believed to be true, forming the basis upon which further ideas, policies, or actions are built.

Allocate Delivery

Allocate Delivery refers to the process of assigning specific goods or services to be delivered as part of the fulfillment of a contract or agreement.