Question

8 Other things held constant, ifa fir tretches" e, delays paying) its accounts payable, this will lengthen its cash comvesion cycle (CCC) a True h. Fale 9. Which of the following actions should Reece Windows take if it wants to tedluce its cash conversion cycle a. Start paying its bills sooner, which would reduce the average accounts payable but not affect sales b Take steps to reduce the DSO e. Sell common stock to retire longterm bonds d. Sell an issue of longterm bonds and use the proceeds to buy back some of its common stock. e. Increase average inentory without increasing sales 10. Brothers Breads has the following data. What is the firm's cash conversion eycle Inventory convension period Average collection period Payables deferral period a. 31 days b. 34 days 50 days 17 days 25 days c. 38 days d. 42 days e. 46 days 11. Data on Liu Inc. for the most recent year are showwn below, along with the inventory convension period (ICP) of the firms against which it benchmarks. The firm's new CFO believes that the company could reduce its inventory enough to reduce its ICP to would inventories decline! Use a 365day year. benchmarks' average. If this were done, by how much Cost of goods sold Inventory Inventory conversion period (ICP)- Benchmark inventory conversion period (ICP)- a. $7,316 $85,000 $20,000 85.88 38.00 b. $8,129 c. $9,032 d. $10,036 e. $11,151

Answer 1

8]

CCC = Days inventory outstanding + days sales outstanding - days purchases outstanding.

If a firm delays paying its accounts payable, the days purchases outstanding will increase. Therefore the CCC will decrease.

False, the CCC will shorten.