Question

43. You have recently been hired to analyze a firm’s cash conversion cycle. Using the following information and a 365-day year: Current inventory = $120,000; Annual sales = $600,000; Accounts receivable = $157,808; Accounts payable = $25,000; Total annual purchases = $365,000. Calculate the firm’s cash conversion cycle (CCC).

		25 days
		73 days
		96 days
		144 days

44. Based on the results in Question 43, which of the following methods can be used to improve the firm’s cash conversion cycle?

		Increase the firm’s inventory conversion cycle.
		Increase the firm’s receivables collection period.
		Increase the firm’s payables deferral period.

50. A firm is already has a factory that can be used for a project. If the factory can be leased at $500,000 per year. The annual opportunity cost of the property for the project is _____. We assume the corporate tax rate is 40%.

1. $0
2. $200,000
3. 300,000
4. 500,000

Answer 1

44. Increase the firm’s payables deferral period

50. Opportunity cost = 500,000×(1-0.4) = 300,000