Whitson Co. is looking for ways to shorten its cash conversion cycle. It has annual sales...

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Whitson Co. is looking for ways to shorten its cash conversioncycle. It has annual sales of $45,625,000, or $125,000 a day on a365-day basis. The firm's cost of goods sold is 70% of sales. Onaverage, the company has $7,500,000 in inventory, $5,750,000 inaccounts receivable, and $2,750,000 in accounts payable. Its CFOhas proposed new policies that would result in a 25% reduction inboth average inventories and accounts receivable, and a 10%increase in average accounts payable. She also anticipates thatthese policies would reduce sales by 5%. What effect would thesepolicies have on the company's cash conversion cycle?

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Whitson Co. is looking for ways to shorten its cash conversioncycle. It has annual sales of $45,625,000, or $125,000 a day on a365-day basis. The firm's cost of goods sold is 70% of sales. Onaverage, the company has $7,500,000 in inventory, $5,750,000 inaccounts receivable, and $2,750,000 in accounts payable. Its CFOhas proposed new policies that would result in a 25% reduction inboth average inventories and accounts receivable, and a 10%increase in average accounts payable. She also anticipates thatthese policies would reduce sales by 5%. What effect would thesepolicies have on the company's cash conversion cycle?