Question: Alexandria Products is concerned about managing cash efficiently. On average, inventories have an age of 90 days, and accounts receivable are collected in 60 days.

Alexandria Products is concerned about managing cash efficiently. On average, inventories have an age of 90 days, and accounts receivable are collected in 60 days. Accounts payable are paid approximately 30 days after they arise. The firm has annual sales of about US$30 million. Assume there is no difference in the investment per U.S. dollar of sales in inventory, receivables, and payables; and a 365day year.

a. Calculate the firm's operating cycle.

b. Calculate the firm's cash conversion cycle.

c. Calculate the amount of resources needed to support the firm's cash conversion cycle.

d. Discuss how management might be able to reduce the cash conversion cycle.

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