Explain how much cash would be freed-up

Reference no: EM13287625

Its cost of goods sold is 75% of sales, and it finances working capital with bank loans at an 8% rate. Assume 365 days in year for your calculations.

Stone Rock has:

$13 million of sales
$2 million of inventories
$3 million of receivables
$2 million of payables

If Stone Rock could lower its inventories and receivables by 9% each and increase its payables by 9%, all without affecting sales or cost of goods sold.

How much cash would be freed-up? Round your answer to the nearest cent.

By how much would pre-tax profits change? Round your answer to the nearest cent.

Reference no: EM13287625

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