through wholesalers. The Futuro line has been very successful, accounting for nearly 40 percent of the firm’ s sales and profits in 2011. Casa de Diseno anticipates some additions to the Futuro line and also some limited change of direction in its promotion in an effort to expand the applications of the plastic furniture. Leal has decided to study the firm’ s cash management practices. To determine the effects of these practices, she must first determine the current operating and cash conversion cycles. In her investigations, she found that Casa de Diseno purchases all of its raw materials and production supplies on open account. The company is operating at production levels that preclude volume discounts. Most suppliers do not offer cash discounts, and Casa de Diseno usually receives credit terms of net 30. An analysis of Casa de Diseno’ s accounts payable showed that its average payment period is 30 days. Leal consulted industry data and found that the industry average payment period was 39 days. Investigation of six California furniture manufacturers revealed that their average payment period was also 39- days. Next, Leal studied the production cycle and inventory policies. Casa de Diseno tries not to hold any more inventory than necessary in either raw materials or finished goods. The average inventory age was 110 days. Leal determined that the industry standard, as reported in a survey done by Furniture Age, the trade association journal, was 83 days. Casa de Diseno sells to all of its customers on a net-60 basis, in line with the industry trend to grant such credit terms on specialty furniture. Leal discovered, by aging the accounts receivable, that the average collection period for the firm was 75 days. Investigation of the trade association’ s and California manufacturers’ averages showed that the same collection period existed where net-60 credit terms were given. Where cash discounts were offered, the collection period was significantly shortened. Leal believed that if Casa de Diseno were to offer credit terms of 3 / 10 net 60, the average collection period could be reduced by 40 percent. Casa de Diseno was spending an estimated $ 26,500,000 per year on operating-cycle investments. Leal considered this expenditure level to be the minimum she could expect the firm to disburse during 2012. Her concern was whether the firm’ s cash management was as