Question: Astra Pharmaceuticals is concerned about managing cash efficiently. On average, inventories have an age of 70 days and accounts receivable are collected in 50 days.

Astra Pharmaceuticals is concerned about managing cash efficiently. On average, inventories have an age of 70 days and accounts receivable are collected in 50 days. Accounts payable are paid approximately 30 days after they arise. The firm has annual sales of about $25 million. Assume there is no difference in investment per dollar in inventory, receivables and payables; and a 365-day year.

a) What is the companys cash conversion cycle? (4 marks) b) Calculate Astra working capital requirement based on sales of $25 million. (3 marks) c) Discuss how Astra can reduce working capital requirement based on its current sales figures. (3 marks)

[Total: 10 marks]

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