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In: Finance

Period End Date 31-Dec-19 31-Dec-18 31-Dec-17 31-Dec-16 31-Dec-15 Total Inventories 17516000000 16450000000 15296000000 14760000000 14001000000 Cost...

Period End Date 31-Dec-19 31-Dec-18 31-Dec-17 31-Dec-16 31-Dec-15
Total Inventories 17516000000 16450000000 15296000000 14760000000 14001000000
Cost of Goods Sold incl. Depreciation 211248000000.00 163041000000.00 156258000000.00 148623000000.00 126762000000.00
Net Sales or Revenue 256577000000.00 194578000000.00 184786000000.00 177526000000.00 153290000000.00
Accounts Receivable Gross 17555000000 17303000000 13342000000 12450000000 12049000000
Accounts Payable 30972000000 26437000000 19223000000 17397000000 15143000000

Find the Operating cycle and Cash cycle (show work).

Solutions

Expert Solution

Days in inventory formula= Average Inventory/Cost of goods sold × 365

= (17516000000 + 16450000000/2)/ 211248000000 ×365

= (33966000000/2) / 211248000000 × 365

= 16983000000 / 211248000000 × 365

= 0.080 × 365

= 29.34 days

Days of sales outstanding= Average Account receivable / Sales × 365

= (1755500000+17303000000/2) / 256577000000 × 365

= ( 34858000000 / 2 ) / 256577000000

= 17429000000/ 256577000000 × 365

= 0.0679 × 365

= 24.79 days

Days of payable outstanding= Average Payable / cost of goods sold × 365

= (30972000000+26437000000/2) / 211248000000 × 365

= ( 57409000000/2 ) / 211248000000 × 365

= 28704500000 / 211248000000 × 365

= 0.135881 × 365

= 49.60 days

A) Operating cycle of 2019 = Days of inventory outstanding + Days of sales outstanding

= 29.34 days + 24.79 days

=  54.13 days

B) Cash conversion cycle of 2019= Operating cycle - Days of payable outstanding

= 54.13 - 49.60 days

= 4.53 days

jeff jeffy answered 2 years ago
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