ExpertCPA · Question 01 · Area I: Business Analysis
Orion Corp. is analyzing its working capital efficiency. For the current year, Orion reported the following data:<br/>- Cost of Goods Sold: $12,000,000<br/>- Average Inventory: $2,000,000<br/>- Net Credit Sales: $18,000,000<br/>- Average Accounts Receivable: $1,500,000<br/>- Purchases: $12,500,000<br/>- Average Accounts Payable: $1,250,000<br/><br/>Management is considering a new vendor policy that would increase the average accounts payable to $1,800,000 without changing purchase volume or cost. Assuming all other factors remain constant, what would be the impact on Orion's Cash Conversion Cycle (CCC)?
Orion Corp. is analyzing its working capital efficiency. For the current year, Orion reported the following data:<br/>- Cost of Goods Sold: $12,000,000<br/>- Average Inventory: $2,000,000<br/>- Net Credit Sales: $18,000,000<br/>- Average Accounts Receivable: $1,500,000<br/>- Purchases: $12,500,000<br/>- Average Accounts Payable: $1,250,000<br/><br/>Management is considering a new vendor policy that would increase the average accounts payable to $1,800,000 without changing purchase volume or cost. Assuming all other factors remain constant, what would be the impact on Orion's Cash Conversion Cycle (CCC)?
Answer options:
The CCC would increase by approximately 16.1 days.
The CCC would decrease by approximately 16.1 days.
The CCC would decrease by approximately 10.5 days.
The CCC would increase by approximately 10.5 days.
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