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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4.2 Ratings (695 Votes)

Answer Projected increase in operating cash flows 3616 This looks very good on paper but the company would face some hurdles along the way Reducing DSO from 124 days to 40 days might not be too easy The average 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 3 Most Recent Values for Firm ZAccounts Receivable $51Inventory $17Accounts Payable $13Revenues $150CGS $122