Question

INCOME STATEMENT AND BALANCE SHEET FOR 2015 SELECTED U.S. INDUSTRIES FOR 2015 (Figures in $ millions)
	Food				Pharmaceuticals				Oil and Coal				Computers and Peripherals				Food Stores
Income Statement Data:
Sales	$	676.7			$	396.8			$	1,049.2			$	206.1			$	463.7
Cost of goods sold		614.2				328.9				990.6				166.3				439.8
Balance Sheet Data:
Inventory	$	64.1			$	52.4			$	49.5			$	8.8			$	25.1
Accounts receivable		51.4				60.6				73.2				20.2				5.7
Accounts payable		41.8				39.2				76.3				28.3				21.6
Note: Cost of goods sold includes selling, general, and administrative expenses. Calculate the cash cycle for each industry. (Round your answers to 1 decimal place.)

Answer 1

Food:

Average Receivable Period = 365 * Accounts Receivable / Sales
Average Receivable Period = 365 * $51.4 / $676.7
Average Receivable Period = 27.7 days

Average Inventory Period = 365 * Inventory / Cost of Goods Sold
Average Inventory Period = 365 * $64.1 / $614.2
Average Inventory Period = 38.1 days

Average Payable Period = 365 * Accounts Payable / Cost of Goods Sold
Average Payable Period = 365 * $41.8 / $614.2
Average Payable Period = 24.8 days

Cash Cycle = Average Receivable Period + Average Inventory Period - Average Payable Period
Cash Cycle = 27.7 days + 38.1 days - 24.8 days
Cash Cycle = 41.0 days

Pharmaceuticals:

Average Receivable Period = 365 * Accounts Receivable / Sales
Average Receivable Period = 365 * $60.6 / $396.8
Average Receivable Period = 55.7 days

Average Inventory Period = 365 * Inventory / Cost of Goods Sold
Average Inventory Period = 365 * $52.4 / $328.9
Average Inventory Period = 58.2 days

Average Payable Period = 365 * Accounts Payable / Cost of Goods Sold
Average Payable Period = 365 * $39.2 / $328.9
Average Payable Period = 43.5 days

Cash Cycle = Average Receivable Period + Average Inventory Period - Average Payable Period
Cash Cycle = 55.7 days + 58.2 days - 43.5 days
Cash Cycle = 70.4 days

Oil and Coal:

Average Receivable Period = 365 * Accounts Receivable / Sales
Average Receivable Period = 365 * $73.2 / 1,049.2
Average Receivable Period = 25.5 days

Average Inventory Period = 365 * Inventory / Cost of Goods Sold
Average Inventory Period = 365 * $49.5 / $990.6
Average Inventory Period = 18.2 days

Average Payable Period = 365 * Accounts Payable / Cost of Goods Sold
Average Payable Period = 365 * $76.3 / $990.6
Average Payable Period = 28.1 days

Cash Cycle = Average Receivable Period + Average Inventory Period - Average Payable Period
Cash Cycle = 25.5 days + 18.2 days - 28.1 days
Cash Cycle = 15.6 days

Computers and Peripherals:

Average Receivable Period = 365 * Accounts Receivable / Sales
Average Receivable Period = 365 * $20.2 / $206.1
Average Receivable Period = 35.8 days

Average Inventory Period = 365 * Inventory / Cost of Goods Sold
Average Inventory Period = 365 * $8.8 / $166.3
Average Inventory Period = 19.3 days

Average Payable Period = 365 * Accounts Payable / Cost of Goods Sold
Average Payable Period = 365 * $28.3 / $166.3
Average Payable Period = 62.1 days

Cash Cycle = Average Receivable Period + Average Inventory Period - Average Payable Period
Cash Cycle = 35.8 days + 19.3 days - 62.1 days
Cash Cycle = -7.0 days

Food Stores:

Average Receivable Period = 365 * Accounts Receivable / Sales
Average Receivable Period = 365 * $5.7 / $463.7
Average Receivable Period = 4.5 days

Average Inventory Period = 365 * Inventory / Cost of Goods Sold
Average Inventory Period = 365 * $25.1 / $439.8
Average Inventory Period = 20.8 days

Average Payable Period = 365 * Accounts Payable / Cost of Goods Sold
Average Payable Period = 365 * $21.6 / $439.8
Average Payable Period = 17.9 days

Cash Cycle = Average Receivable Period + Average Inventory Period - Average Payable Period
Cash Cycle = 4.5 days + 20.8 days - 17.9 days
Cash Cycle = 7.4 days