Zervos Inc ?
A) 40

question 40

Multiple Choice

Zervos Inc.had the following data for last year (in millions) .The new CFO believes (1) that an improved inventory management system could lower the average inventory by $4,000, (2) that improvements in the credit department could reduce receivables by $2,000,and (3) that the purchasing department could negotiate better credit terms and thereby increase accounts payable by $2,000.Furthermore,she thinks that these changes would not affect either sales or the costs of goods sold.If these changes were made,by how many days would the cash conversion cycle be lowered? Do not round your intermediate calculations. $$\begin{array} { l r r } & \text { Original } & \text { Revised } \\\hline\text { Annual sales: unchanged } & \$ 117,000 & \$ 117,000 \\\text { Cost of goods sold: unchanged } & \$ 80,000 & \$ 80,000 \\\text { Average inventory: lowered by } \$ 4,000 & \$ 20,000 & \$ 16,000 \\\text { Average receivables: lowered by } \$ 2,000 & \$ 16,000 & \$ 14,000 \\\text { Average payables: increased by } \$ 2,000 & \$ 10,000 & \$ 12,000 \\\text { Days in year } & 365 & 365\end{array}$$
?

• A) 40.3 days
• B) 37.6 days
• C) 39.7 days
• D) 33.6 days
• E) 32.6 days

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