Question

In: Finance

Consider the following financial statement information for the Hop Corporation: Item Beginning Ending Inventory $11,600 $12,600 ...

Consider the following financial statement information for the Hop Corporation:

Item Beginning Ending

Inventory $11,600 $12,600

Accounts receivable 6,600 6,900

Accounts payable 8,800 9,200

Net sales $96,000

Cost of goods sold 76,000

Calculate the operating and cash cycles.

Expert Solution

Average Collection Period

Average Collection Period = Average Accounts Receivables / Credit Sales per day

= [($6,600 + $6,900)/2] / [$96,000 365 Days]

= [$13,500 / 2] / [$96,000 365 Days]

= $6,750 / $263.01 per day

= 25.66 Days

Days sales in Inventory

Days sales in Inventory = Average Inventory / Cost of goods sold per day

= [($11,600 + $12,600)/2] / [$76,000 / 365 Days]

= [$24,200 / 2] / [$76,000 / 365 Days]

= $12,100 / $208.22 per day

= 58.11 Days

Accounts Payables Deferral Period

Accounts Payable Deferral Period = Average Accounts Payable / Cost of goods sold per day

= [($8,800 + $9,200] / [$76,000 / 365 Days]

= [$18,000 / 2] / [$76,000 / 365 Days]

= $9,000 / $208.22 per day

= 43.22 Days

Operating Cycle

Operating Cycle = Average Collection Period + Days sales in Inventory

= 25.66 Days + 58.11 Days

= 83.77 Days

Cash Cycle

Cash Cycle = Operating Cycle – Accounts Payables Deferral Period

= 83.77 Days – 43.22 Days

= 40.55 Days

jeff jeffy answered 8 months ago

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