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Comprehensive Financial Analysis: Cash Conversion Cycle, Dividend Policies, and Investment Decisions

A comprehensive quiz on financial analysis, covering cash conversion cycles, dividend policies, and investment decision-making.

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Comprehensive Financial Analysis: Cash Conversion Cycle, DividendPolicies, and Investment Decisions1.Cash conversion cyclePrimrose Corp has $12 million of sales, $3 million of inventories, $4 million of receivables, and $1 million ofpayables. Its cost of goods sold is 85% of sales, and it finances working capital with bank loans at an 8%rate. Assume 365 days in year for your calculations. Do not round intermediate steps.1.What is Primrose's cash conversion cycle (CCC)? Round your answer to two decimal places.________daysCCC= (Inventory / COGS * 365) + (Receivables / Sales * 365)-(Payables /COGS * 365)•Answer=[Calculated CCC]days. (Plug in actual values for your finalcalculation)2.If Primrose could lower its inventories and receivables by 9% each andincreaseits payables by9%, all without affecting sales or cost of goods sold, what would be the new CCC? Round youranswer to two decimal places._______daysApply 9% decrease to inventories and receivables, and 9% increase to payables to theCCC formula.•Answer=[Calculated CCC]days.3.How much cash would be freed-up? Round your answer to the nearest cent.$________By how much would pre-tax profits change? Round your answer to the nearest cent.$________Cash freed-up = Change in Inventory + Change in Receivables-Change in Payables.•Answer=[Calculated amount].Pre-tax profit = Freed-up cash * 8% (interest rate)•Answer=[Calculated pre-tax profit change].

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