Baxter United currently has a 41 day cash cycle. Assume the firm changes its operations such that it decreases its receivables period by 7 days, decreases its inventory period by 4 days, and decreases its payables period by 3 days. What will be the length of the cash cycle after these changes?

Question

Quizplus · Accepted Answer

The cash cycle is calculated as the sum of the receivables period and the inventory period minus the payables period. After decreasing the receivables period by 7 days, the inventory period by 4 days, and the payables period by 3 days, the new cash cycle is 41 - 7 - 4 + 3 = 33 days.

Baxter United Currently Has a 41 Day Cash Cycle