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A firm is considering the following changes: increasing inventory variety,which will increase inventory to $60,000,and offering more liberal sales terms,which will result in average receivables increasing to $65,000.These actions are expected to increase sales to $800,000 per year,and cost of goods will remain at 75%.Because of the increased purchases,average payables will increase to $35,000.What effect will these changes have on the cash conversion cycle?
Economies of Scale
Cost advantages that enterprises obtain due to scale of operation, with cost per unit of output generally decreasing with increasing scale.
Operating Efficiencies
A measure of how well a company utilizes its resources to produce goods and services, often reflecting in the reduction of costs and improvement in output.
Poison Pill
A strategy employed by companies to prevent or discourage hostile takeovers by making the company less attractive to the would-be acquirer.
Unfriendly Takeover
A takeover bid opposed by the management of the target company.
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