A Firm Has a Cash Conversion Cycle of 60 Days

question 21

Multiple Choice

A firm has a cash conversion cycle of 60 days. Annual outlays are $12 million and the cost of negotiated financing is 12 percent. If the firm reduces its average age of inventory by 10 days, the annual savings is

• A) $104,000.
• B) $144,000.
• C) $28,800.
• D) $40,000.

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Definitions:

Federal Income Tax

A tax levied by the United States federal government on the annual earnings of individuals, corporations, trusts, and other legal entities.

Trade Fixtures

Articles of personal property that have been annexed to real property leased by a tenant during the term of the lease and that are necessary to the carrying on of a trade.

Substantial Damage

Significant physical harm or damage to a property or structure, often affecting its value, usability, or function.

Lease Term

The duration for which a lease agreement is valid, typically specifying start and end dates.