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Measure dollar bill financing cycle

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Reference no: EM133069041

Situation 1

Sales of $730,000

Financing Rate 6.5%

Situation 2

Using the Cash Conversion Model, measure DOLLAR BILL'S financing cycle in both days and money ($US) using the following assumptions:

  • Gross Margin of 30%

Recent management decisions have had the following impact:

  • DOLLAR BILL has renegotiated its credit line so that it has 35 days to pay its suppliers
  • It now extends 45 days of credit to its customers,
  • It has an inventory turnover rate of 45 days.

All other factors remain the same. Has DOLLAR BILL'S financing cycle improved or declined? Quantify the change in days and in dollars. Please show your work.

Reference no: EM133069041

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