What effect would the proposed policy have

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Question - Your company has annual sales of $30,475,000. The company's cost of goods sold is $18,500,000. On average, the company has $9,575,000 in inventory and $6,780,000 in accounts receivable. Management is looking for ways to shorten its cash conversion cycle and they have proposed a new policy that would result in a 20% reduction in accounts receivable; however, this policy would also result in a 5%% reduction in sales. The inventory conversion period and the payables deferral period would remain unchanged. Payables deferral period is 50 days. What effect would the proposed policy have on the company's cash conversion cycle?

Reference no: EM133184131

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