ExpertCPA · Question 01 · Area I: Business Analysis
Orion Manufacturing provides the following financial data for the current year:<br/><br/>- Net Sales: $5,000,000<br/>- Cost of Goods Sold: $3,500,000<br/>- Average Accounts Receivable: $450,000<br/>- Average Inventory: $600,000<br/>- Average Accounts Payable: $320,000<br/><br/>Management is considering a new vendor agreement that would increase the average accounts payable to $400,000 but would require a price increase on raw materials, raising Cost of Goods Sold by $100,000 (assuming sales price and volume remain constant). What would be the net impact on the Cash Conversion Cycle (CCC)? (Assume a 365-day year).
Orion Manufacturing provides the following financial data for the current year:<br/><br/>- Net Sales: $5,000,000<br/>- Cost of Goods Sold: $3,500,000<br/>- Average Accounts Receivable: $450,000<br/>- Average Inventory: $600,000<br/>- Average Accounts Payable: $320,000<br/><br/>Management is considering a new vendor agreement that would increase the average accounts payable to $400,000 but would require a price increase on raw materials, raising Cost of Goods Sold by $100,000 (assuming sales price and volume remain constant). What would be the net impact on the Cash Conversion Cycle (CCC)? (Assume a 365-day year).
Answer options:
The CCC would decrease by approximately 8.3 days.
The CCC would decrease by approximately 6.5 days.
The CCC would increase by approximately 1.8 days.
The CCC would decrease by approximately 15.5 days.
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