Table 3 provides the most recent financial values for Firm Z. The CFO wants to implement...

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Finance

Table 3 provides the most recent financial values for Firm Z.The CFO wants to implement strategic and operational changes thatwill lower the firm’s DSO to 40 days, DIH to 35 days, and increaseDPO to 50 days. Assuming that these changes can be met withoutreducing revenues or CGS, calculate the resulting increase inoperating cash flow due to reducing the CCC. Lastly, discuss anyweaknesses in the model assumptions that might result in theprojected increase in operating cash flow not materializing.
Table 3
Most Recent Values for Firm Z
Accounts Receivable
$51
Inventory
$17
Accounts Payable
$13
Revenues
$150
CGS
$122

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First we calculate the current values of DSO DIH and DPO Current DSO 365 sales accounts receivable 365 150 51 124 days Current DIH 365 CGS inventory 365 122 17 51 See Answer

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Table 3 provides the most recent financial values for Firm Z.The CFO wants to implement strategic and operational changes thatwill lower the firm’s DSO to 40 days, DIH to 35 days, and increaseDPO to 50 days. Assuming that these changes can be met withoutreducing revenues or CGS, calculate the resulting increase inoperating cash flow due to reducing the CCC. Lastly, discuss anyweaknesses in the model assumptions that might result in theprojected increase in operating cash flow not materializing.Table 3Most Recent Values for Firm ZAccounts Receivable$51Inventory$17Accounts Payable$13Revenues$150CGS$122

	Most Recent Values for Firm Z
Accounts Receivable	$51
Inventory	$17
Accounts Payable	$13
Revenues	$150
CGS	$122