Data on Liu Inc A) $7,316
B) $8,129
C) $9,032
D) $10,036
E) $11,151

question 113

Multiple Choice

Data on Liu Inc.for the most recent year are shown below, along with the inventory conversion period (ICP) of the firms against which it benchmarks.The firm's new CFO believes that the company could reduce its inventory enough to reduce its ICP to the benchmarks' average.If this were done, by how much would inventories decline? Use a 365-day year. $\begin{array}{lr}\text { Cost of goods sold = } & \$ 85,000 \\\text { Inventory }= & \$ 20,000 \\\text { Inventory conversion period (ICP) }= & 85.88 \\\text { Benchmark inventory conversion period (ICP) }= & 38.00\end{array}$

• A) $7,316
• B) $8,129
• C) $9,032
• D) $10,036
• E) $11,151

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Definitions:

Straight-Line Depreciation

A method of allocating the cost of an asset evenly across its useful life.

Capital Budgeting

The procedure of appraising and opting for long-term investments consistent with the goal of increasing the wealth of shareholders.

Straight-Line Depreciation

This refers to a method where the cost of a fixed asset is evenly reduced over its useful life.

Capital Budgeting

The process of making investment decisions in long-term assets and projects, evaluating their potential costs and benefits to ensure the most financially beneficial investments are made.