Reference no: EM132582328

When the Copper Corporation buys inventory, it must often rely on short-term bank financing to pay for the goods. Bank financing is usually in the form of a short-term self-liquidating loan, where the amount outstanding increases when goods are paid for and decreases when cash is received from sales. Copper's bank charges interest at prime (7%) plus 1%

November 1 Buy inventory for $10,000

December 1 Pay supplier / borrow $10,000

January 30 Sell goods for $20,000

March 15 Collect receivables, $20,000, and repay loan, $10,000

Copper buys and receives $10,000 worth of inventory on November 1.

The supplier's invoice is due on December 1.

Copper expects to sell the goods about January 30, say for $20,000.

Copper expects to receive the cash about March 15.

Accordingly, Copper would borrow $10,000 on December 1 in order to pay the supplier. It would repay the loan on March 15, when the cash becomes available.

Question 1: What is the inventory holding period?

Question 2: What is the receivables collection period?

Question 3: What is the operating cycle?

Question 4: What is the payables payment period?

Question 5: What is the cash conversion cycle?

Question 6: what is Copper' interest expense in this situation?