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By what amount would receivables have to decrease

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Question - A company currently has the following account balances: Cash $3,000,000

Receivables $5,435,000

Inventories $8,750,000

Payables $12,000,000

Assume that these are the regular levels for each of these accounts under current policies. As well, assume that all sales are on credit, and annual sales are steady at $60,000,000 per year while cost of sales are steady at $42,500,000 per year.

The company is considering a change in credit policy with a goal of reducing its accounts receivable and its cash cycle. By what amount would receivables have to decrease in order to reduce the cash cycle by 5 days?

Reference no: EM133001504

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