Question

In: Finance

Suppose that Ken-Z Art Gallery has annual sales of $898,000, cost of goods sold of $588,000,...

Suppose that Ken-Z Art Gallery has annual sales of $898,000, cost of goods sold of $588,000, average inventories of $174,000, average accounts receivable of $107,000, and an average accounts payable balance of $53,000. Assuming that all of Ken-Z’s sales are on credit, what will be the firm’s cash cycle? (Use 365 days a year. Do not round intermediate calculations and round your final answer to 2 decimal places.) Cash cycle days

Solutions

Expert Solution

Cash Conversion Cycle is the duration of time.This time starts with buying of Raw Materials, Selling and collection of sales and paying the liabilities of goods purchased.
Cash Cycle days = DIO+DSO-DPO Where,
=      108.01 +                 43.49 -                 32.90 DIO Days Inventory Outstanding
=      118.60 Days DSO Days sales outstanding
DPO Days Payable Outstanding
Working:
# 1
Inventory turnover ratio = Cost of goods sold/Average Inventory
= $       5,88,000 / $       1,74,000
=                    3.38
# 2 DIO = Days in a year/Inventory turnover ratio
= 365 /                    3.38
=               108.01 Days
# 3 Accounts receiable turnover = Annual credit sales /Average Accounts Receivable
= $       8,98,000 /           1,07,000
=                    8.39
# 4 DSO = Days in a year/Accounts receivable turnover
= 365 /                    8.39
=                 43.49 Days
# 5 Payable turnover = Cost of goods sold/Average accounts payable
= $       5,88,000 / $           53,000
=                 11.09
# 6 Days Payable outstanding = Days in a year/Accounts payable turnover
= 365 /                 11.09
=                 32.90 Days

jeff jeffy answered 2 years ago
Next > < Previous

Related Solutions

Suppose that LilyMac Photography has annual sales of $237,000, cost of goods sold of $172,000, average...
Suppose that LilyMac Photography has annual sales of $237,000, cost of goods sold of $172,000, average inventories of $5,200, average accounts receivable of $26,400, and an average accounts payable balance of $7,700. Assuming that all of LilyMac’s sales are on credit, what will be the firm’s cash cycle? (Use 365 days a year. Do not round intermediate calculations and round your final answer to 2 decimal places.) Cash Cycle Days _________
Suppose that LilyMac Photography has annual sales of $221,000, cost of goods sold of $156,000, average...
Suppose that LilyMac Photography has annual sales of $221,000, cost of goods sold of $156,000, average inventories of $6,400, average accounts receivable of $28,800, and an average accounts payable balance of $19,100. Assuming that all of LilyMac’s sales are on credit, what will be the firm’s cash cycle? (Use 365 days a year. Do not round intermediate calculations. Round your final answer to 2 decimal places.)
Suppose that LilyMac Photography has annual sales of $232,000, cost of goods sold of $167,000, average...
Suppose that LilyMac Photography has annual sales of $232,000, cost of goods sold of $167,000, average inventories of $4,700, and average accounts receivable of $25,200. Assume that all of LilyMac’s sales are on credit. What will be the firm’s operating cycle? (Use 365 days a year. Do not round intermediate calculations and round your final answer to 2 decimal places.) Operating Cycle Days ____________
XYZ Company has annual sales of $692,584. The cost of goods sold are $444,925. The firm...
XYZ Company has annual sales of $692,584. The cost of goods sold are $444,925. The firm has an accounts receivable balance of $5,685, an accounts payable balance of $18,445 and inventory of $9,946. How many days on average does it take the firm to collect its accounts receivable? That is, what is the average collection period? Assume 365 days.
XYZ Company has annual sales of $518,138. The cost of goods sold are $392,068. The firm...
XYZ Company has annual sales of $518,138. The cost of goods sold are $392,068. The firm has an accounts receivable balance of $16,047, an accounts payable balance of $15,631 and inventory of $18,963. How many days does it take on average for the firm to pay its suppliers? That is, what is the payable period? Assume 365 days
Dickson City Company has annual sales of $5 million, while the cost of goods sold is...
Dickson City Company has annual sales of $5 million, while the cost of goods sold is $3.2 million. All sales are made on a cash basis. The owner of Dickson has come up with the plan of giving credit to the customers. He believes that this will increase the sales by 25% without increasing any of the fixed costs. He thinks that 20% of the customers will pay within 30 days, 40% within 60 days, 37% within 90 days, and...
The following partial information is available for company Z: Sales $5000 Cost of goods sold $500...
The following partial information is available for company Z: Sales $5000 Cost of goods sold $500 Salary expense $300 Unearned revenue (customer advance ) $200 Interest income $100 Gross profit would be:
Ratios: Answer the following questions. a. Galaxy Sales has sales of $746,700, cost of goods sold...
Ratios: Answer the following questions. a. Galaxy Sales has sales of $746,700, cost of goods sold of $603,200, and inventory of $94,300. How long on average does it take the firm to sell its inventory? b. Goshen Industrial Sales has sales of $828,900, total equity of $539,200, a profit margin of 4.6 percent and a debt-equity ratio of 0.55. What is the return on assets? c. Freedom Health Centers has total equity of $861,300, sales of $1.48 million, and a...
The following company has sales of $30 million and a cost of goods sold of $18...
The following company has sales of $30 million and a cost of goods sold of $18 million. The balance sheet for period ending 31 December 2018 for this company appears below Assets                                                      $000 Liabilities and Shareholder Equity      $000 Cash                                                         2500   Accounts Payable                                    1600 Accounts Receivable                             4400 Other Payables                                           900 Inventory                                                1500 Accruals                                                      1100 Total Current Assets                            8400 Total Current Liabilities                          3600 Property Plant and Equipment         10500 Long Term Debt                                        2500 Total Assets                                         18900 Total Liabilities                                         6100 Issued Equity                                           12800 Total...
The Cost of Sales (or Cost of Goods Sold) is usually considered the most important cost...
The Cost of Sales (or Cost of Goods Sold) is usually considered the most important cost in hospitality businesses. How is it determined? Please select the most appropriate answer. 1. It is calculated by adding up all purchases of inventory during one accounting period. 2. It is the amount of inventory on hand. It is calculated by adding the value of every item of inventory available on hand. 3. It is calculated by adding all purchase amounts to the beginning...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT