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Q1.Whitson Co. is looking for ways to shorten its cashconversion cycle. It has annual sales of $45,625,000, or $125,000 aday on a 365-day basis. The firm's cost of goods sold is 80% ofsales. On average, the company has $7,500,000 in inventory,$5,750,000 in accounts receivable, and $2,750,000 in accountspayable. Its CFO has proposed new policies that would result in a25% reduction in both average inventories and accounts receivable,and a 10% increase in average accounts payable. She alsoanticipates that these policies would reduce sales by 5%. What effect would these policies have on the company's cashconversion cycle? Q2.Newsome Inc. buys on terms of 4/10, net 45. It doesnot take the discount, and it generally pays after 65 days. What isthe effective (not nominal) annual percentage cost of its non-freetrade credit, based on a 365-day year?