ABC Company currently has a cash cycle of 270 days. The company went through a management...
ABC Company currently has a cash cycle of 270 days. The company went through a management change. The new management has changed the working capital policies for the company. The new policies will decrease the inventory period by 28 days, decrease the accounts receivable period by 39 days, and decrease the accounts payable period by 40 days.
Calculate the number of days in the new cash cycle after the above changes become effective? That is, what is the new cash cycle?
Homework Answers
The number of days in the new cash cycle is computed as shown below:
= Current cash cycle - Decrease in inventory period - Decrease in accounts receivable period + Decrease in accounts payable period
= 270 days - 28 days - 39 days + 40 days
= 243 days
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