Parramore Corp has $10 million of sales, $1 million of inventories, $4 million of receivables, and...

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Parramore Corp has $10 million of sales, $1 million ofinventories, $4 million of receivables, and $1 million of payables.Its cost of goods sold is 70% of sales, and it finances workingcapital with bank loans at an 9% rate. Assume 365 days in year foryour calculations. Do not round intermediate steps.
What is Parramore's cash conversion cycle (CCC)? Do not roundintermediate calculations. Round your answer to two decimalplaces.
??? days

If Parramore could lower its inventories andreceivables by 7% each and increase its payables by 7%, all withoutaffecting sales or cost of goods sold, what would be the new CCC?Do not round intermediate calculations. Round your answer to twodecimal places.
??? days

How much cash would be freed up, if Parramore couldlower its inventories and receivables by 7% each andincrease its payables by 7%, all without affecting sales or cost ofgoods sold? Do not round intermediate calculations. Round youranswer to the nearest cent. Write out your answer completely. ForExample, 13.2 million should be entered as 13,200,000.
??? $

By how much would pretax profits change, if Parramore couldlower its inventories and receivables by 7% each andincrease its payables by 7%, all without affecting sales or cost ofgoods sold? Do not round intermediate calculations. Round youranswer to the nearest cent. Write out your answer completely. ForExample, 13.2 million should be entered as 13,200,000.
??? $
**PLEASE LABEL ALL. 4 ANSWERS VERY CLEARLY AND I WILL LEAVEA GOOD. REVIEW*

Answer & Explanation Solved by verified expert

4.2 Ratings (678 Votes)

1]	Sales	$ 1,00,00,000
	Cost of goods sold	$ 70,00,000
	Days sales outstanding [DSO] = 4000000*365/10000000 =	146.00	Days
	Days sales in inventory [DSI] = 1000000*365/7000000 =	52.14	Days
	Days payables outstanding [DPO] = 1000000*365/7000000 =	52.14	Days
	Cash conversion cycle = 146.00+52.14-52.14 =	146.00	Days
2)	Days sales outstanding [DSO] = 400000093%365/10000000 =	135.78	Days
	Days sales in inventory [DSI] = 100000093%365/7000000 =	48.49	Days
	Days payables outstanding [DPO] = 1000000107%365/7000000 =	55.79	Days
	Cash conversion cycle = 146.00+52.14-52.14 =	128.48	Days
3)	Cash freed from receivables = (10000000/365)*(146-135.78) =	$ 2,80,000.00
	Cash freed from inventory = (7000000/365)*(52.14-48.49) =	$ 70,000.00
	Cash freed from payables = (7000000/365)*(55.79-52.14) =	$ 70,000.00
	Net cash freed [280000+70000-70000]	$ 2,80,000.00
4)	Increase in pretax profits = 280000*9% =	$ 25,200.00

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Transcribed Image Text

Parramore Corp has $10 million of sales, $1 million ofinventories, $4 million of receivables, and $1 million of payables.Its cost of goods sold is 70% of sales, and it finances workingcapital with bank loans at an 9% rate. Assume 365 days in year foryour calculations. Do not round intermediate steps.What is Parramore's cash conversion cycle (CCC)? Do not roundintermediate calculations. Round your answer to two decimalplaces.??? daysIf Parramore could lower its inventories andreceivables by 7% each and increase its payables by 7%, all withoutaffecting sales or cost of goods sold, what would be the new CCC?Do not round intermediate calculations. Round your answer to twodecimal places.??? daysHow much cash would be freed up, if Parramore couldlower its inventories and receivables by 7% each andincrease its payables by 7%, all without affecting sales or cost ofgoods sold? Do not round intermediate calculations. Round youranswer to the nearest cent. Write out your answer completely. ForExample, 13.2 million should be entered as 13,200,000.??? $By how much would pretax profits change, if Parramore couldlower its inventories and receivables by 7% each andincrease its payables by 7%, all without affecting sales or cost ofgoods sold? Do not round intermediate calculations. Round youranswer to the nearest cent. Write out your answer completely. ForExample, 13.2 million should be entered as 13,200,000.??? $******PLEASE LABEL ALL. 4 ANSWERS VERY CLEARLY AND I WILL LEAVEA GOOD. REVIEW*****