Question

A firm currently has a 43 day cash cycle. Assume that the firm changes its operations such that it increases its receivables period by 2 days, decreases its inventory period by 1 day and increases its payables period by 3 days. What will the length of the cash cycle be after these changes

Answer 1

41 days

Step-by-step explanation:

Calculation to determine What will the length of the cash cycle be after these changes

Using this formula

Cash cycle Length=Cash cycle+Increases in receivables period -Decreases in inventory period -Increases in payables period

Let plug in the formula

Cash cycle Length = 43 days+2 days -1 days - 3 days

Cash cycle Length= 41 day

Therefore What will the length of the cash cycle be after these changes is 41 days