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Consider the following financial statement data for Flip Sound Systems: Flip Sound Systems Financial Statement Data...

Consider the following financial statement data for Flip Sound Systems:

Flip Sound Systems Financial Statement Data

Item

Beginning Balance

Ending Balance

Inventory

10885

12922

Accounts Receivable

6512

7938

Accounts Payable

8359

10412

Net Sales

99359

Cost of Goods Sold

58406

What is Flip’s Cash Cycle?

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Expert Solution

Particulars Amount
Cash cycle = Days Inventory outstanding + days Sales o/S - Days Payable O/S
Days Inventory outstanding = 365/(58406/11903.5)                              74.39
days Sales o/S = 365/(99359/7225)                              26.54
Days Payable O/S = 365/(58406/9385.5)                              58.65
Cash cycle = 74.39+26.54-58.65= 42.28 days                                     -  
Working: Average inventory= (10885+12922)/2= $11903.5
Average accounts recievable= (6512+7938)/2= $7225
Average accounts payable= (8359+10412)/2= $9385.5
Therefore
Cash cycle=42.28 days

jeff jeffy answered 3 years ago
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