6. Jiffy Park Corp. has annual sales of $50,705,000, an average inventory level of $15,015,000, and average...

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6.   Jiffy Park Corp. hasannual sales of $50,705,000, an average inventory level of$15,015,000, and average accounts receivable of $10,015,000. Thefirm's cost of goods sold is 85% of sales. The company makes allpurchases on credit and has always paid on the 30th day. However,it now plans to take full advantage of trade credit and to pay itssuppliers on the 40th day. The CFO also believes that sales can bemaintained at the existing level but inventory can be loweredby $1,950,000 and accounts receivableby $1,950,000.
     a.   What is Jiffy Park’s cash conversion cycle (CCC)prior to the changes proposed?
     b.   What is Jiffy Park’s CCC after implementing thesuggested changes?
     c.   What is the net change in Jiffy Park’s CCC givenwhat you just calculated above?

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First of all lets understand how is cash conversion cycle or CCC is computed Cash Conversion cycle days of sales outstanding days of inventory outstanding days of payable outstanding Days of sales outstanding Average debtors Net credit sales x 365 Assuming number of days in a year to be 365 It denotes the time on average is taken by the company to collect cash from its See Answer

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6. Jiffy Park Corp. hasannual sales of $50,705,000, an average inventory level of$15,015,000, and average accounts receivable of $10,015,000. Thefirm's cost of goods sold is 85% of sales. The company makes allpurchases on credit and has always paid on the 30th day. However,it now plans to take full advantage of trade credit and to pay itssuppliers on the 40th day. The CFO also believes that sales can bemaintained at the existing level but inventory can be loweredby $1,950,000 and accounts receivableby $1,950,000. a. What is Jiffy Park’s cash conversion cycle (CCC)prior to the changes proposed? b. What is Jiffy Park’s CCC after implementing thesuggested changes? c. What is the net change in Jiffy Park’s CCC givenwhat you just calculated above?