Ithaca Iron has annual operating outlays of $1,800,000 and a cash conversion cycle of 60 days.If the firm currently pays 12 percent for negotiated financing and reduces its cash conversion cycle to 50 days,the annual savings is
A)$60,000.
B)$10,000.
C)$6,000.
D)$16,000.
E)none of above are correct

Question

Quizplus · Accepted Answer

The reduction in the cash conversion cycle by 10 days results in less financing needed. The savings can be calculated as: ($1,800,000 / 360 days) * 10 days * 12% = $6,000.

Ithaca Iron Has Annual Operating Outlays of $1,800,000 and a Cash