Answer:
A. $45
B. $80
C. $8,167
Explanation:
(a) Calculation to determine the firm's cash conversion cycle
Cash conversion cycle=$65 +$15 – $35
Cash conversion cycle=$45
Therefore the firm's cash conversion cycle is $45
(b) Calculation to determine the firm's operating cycle
Operating cycle =$65 +$15
Operating cycle=$80
Therefore the firm's operating cycle is $80
(c) Calculation to determine the daily expenditure and the firm's annual savings if the operating cycle is reduced by 15 days
First step is to calculate the Daily expenditure
Daily expenditure =$1,960,000/360
Daily expenditure=$5,444.44
Now let determine the Annual savings
Annual savings =$5,444.44 *15*0.10
Annual savings=$8,167
Therefore the daily expenditure and the firm's annual savings if the operating cycle is reduced by 15 days will be $8,167
