Problem: Coffee Mill Inc. has calculated its inventory conversion period as 53 days, its accounts receivable collection period as 40 days, and its accounts payable deferral period as 20 days. Coffee Mill's working capital financing needs average $50,000 per day.
Q1. Calculate Coffee Mill's Cash Conversion Cycle.
Q2. If Coffee Mill were to shorten its inventory conversion period by 10 days, what effect would this have on the Cash Conversion Cycle?
Q3. What effect (in dollars) would (b) have on Coffee Mill's total working capital needs?
Please describe your answers in detail.