Reference no: EM132614852

Problem 1: Kiley Corporation had the following data for the most recent year (in millions). The new CFO believes (1) that an improved inventory management system could lower the average inventory by $4,000, (2) that improvements in the credit department could reduce receivables by $2,000, and (3) that the purchasing department could negotiate better credit terms and thereby increase accounts payable by $2,000. Furthermore, she thinks that these changes would not affect either sales or the costs of goods sold. If these changes were made, by how many days would the cash conversion cycle be lowered?

                                                        Original                 Revised

Annual sales: unchanged            $110,000         $110,000

Cost of goods sold: unchanged         $80,000          $80,000

Average inventory: lowered by           $4,000          $20,000       $16,000

Average receivables: lowered by        $2,000            $16,000            $14,000

Average payables: increased by          $2,000               $10,000          $12,000

Days in year                                       365                   365