The Furniture Corporation has an inventory turnover of 7, an average collection period of 45 days, and
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The Furniture Corporation has an inventory turnover of 7, an average collection period of 45 days, and an average payment period of 30 days. Annual sales are $5 million, while the cost of goods sold is $1.8 million.
a. What is The Furniture Corporation’s operating cycle and cash conversion cycle?
b. Calculate the dollar value of inventory that would appear on the balance sheet at year end.
c. Suppose The Furniture Corporation found a way to improve its inventory turnover from 7 to 10. What is the effect of this improvement on the working capital of the firm?
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Related Book For 
Principles Of Managerial Finance
ISBN: 9781292018201
14th Global Edition
Authors: Lawrence J. Gitman, Chad J. Zutter
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