Question: The Saliford Corporation has an inventory conversion period of sixty (60) days, a receivables collection period of 36 days, & a payables deferral period of 24 days.
[A] Calculate the length of the firm’s cash conversion cycle?
[B] If Saliford’s yearly sales are $3,960,000 and all sales are on credit, determine the average balance in accounts receivables? [Suggestion: The accounts receivable balance should equal the average age of the receivables, which is the collection period times the daily sales.]
[C] What would happen to Saliford’s cash conversion cycle if, on average, the length of time that products remain in inventory is shortened to forty-five (45) days?