Jordan Air Inc

question 124

Multiple Choice

Jordan Air Inc.has average inventory of $1,000,000.Its estimated annual sales are 15 million and the firm estimates its receivables collection period to be twice as long as its inventory conversion period.The firm pays its trade credit on time;its terms are net 30.The firm wants to decrease its cash conversion cycle by 10 days.It believes that it can reduce its average inventory to $900,000.Assume a 360-day year and that sales will not change.Cost of goods sold equal 80 percent of sales.By how much must the firm also reduce its accounts receivable to meet its goal of a 10 day reduction?

• A) $101,900
• B) $1,000,000
• C) $291,667
• D) $333,520
• E) $0

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Definitions:

Present Benefits

The advantages or positive outcomes that are received or enjoyed at the current time, as opposed to benefits that may accrue in the future.

Future Benefits

Expected advantages or gains that will be received in the future as a result of current investments or actions.

Production Possibility Frontier

A curve depicting all maximum output possibilities for two goods, given a set of inputs resources and technology, illustrating trade-offs and opportunity costs.

Output Efficiency

The state of producing the maximum output with the minimum wasted effort or expense.