Computation of Firm's New Operating Cycle if they increase inventory turnover from 5.0 times per year to 8.9 times:

Operating Cycle = Inventory Period + Receivables Period

140 = (365 Days / Inventory Turnover) + Receivables Period

140 = ( 365 /5 ) +Receivables Period

140 = 73 + Receivables Period

Receivables Period = 140 - 73

Receivables Period = 67

When the Inventory Turnover Rate changes to 8.9 Times,

New Operating cycle = ( 365 /8.9) + 67

= 41.01 + 67

New Operating Cycle = 108.01 or 108 days.