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Question
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
Answer
This answer is hidden. It contains 171 characters.
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