In: Finance
Consider the following financial statement data for Flip Sound Systems:
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?
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 |