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On average it takes Acme Tool Company 80 days to collect on its sales receivables,...

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Accounting

On average it takes Acme Tool Company 80 days to collect on its sales receivables, and its operating cycle is 290 days.

a. How long is cash typically tied up in inventories? (Show computations)

b. What would be the likely effect to Acme's operating cycle if the company changes its current policy that sales upon credit must be paid within 3 months, instead requiring payment within 2 months? (No calculations needed, just describe the likely effect on Acme's operating cycle.)

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