Problem:
Kanwai fans produces 25,000 fans per day at a cost of $7.50 each (material and labor). It takes the firm 12 days to convert raw materials into a fan and sell ir. Kanwai allows it's customers 30 days in which to pay for the fans they purchase, and the firm generally pays it's suppliers in 20 days.
Required:
Question 1: What is the length of kanwais cash conversion cycle?
Question 2: If kanwai always produces and sells 25,000 fans per day, what amount of working capital must it finance?
Question 3: By what amount can Kanwai's reduce it's working capital financing needs if it was able to stretch its payables deferral period to 25 days?
Note: Please explain comprehensively and give step by step solution.