Question

In: Finance

Suppose the following: Beginning Inventory = 11141 Ending Inventory= 12245 Beginning Receivables = 6450 Ending Receivables...

Suppose the following:

Beginning Inventory = 11141

Ending Inventory= 12245

Beginning Receivables = 6450

Ending Receivables = 6825

Beginning Payables = 8304

Ending Payables = 8758

Credit Sales = 91199

Cost of Goods Sold = 73243

Calculate the following (round final answers to 2 decimal places):

Operating Cycle = days

Cash Cycle = days

Solutions

Expert Solution

Average inventory = ( beginning inventory + ending inventory)/2

Average inventory = (11141+12245)/2

Average inventory = 11693

Average Receivables= ( beginning Receivables+ ending Receivables)/2

Average Receivables = (6450+6825)/2

Average Receivables = 6637.5

Average Payables= ( beginning Payables+ ending Payables)/2

Average Payables = (8304+8758)/2

Average Payables = 8531

Purchases = COGS + beginning inventory - ending inventory

Purchases = 73243+11141-12245

Purchases = 72139

Inventory turnover = COGS/inventory

Inventory turnover = 73243/11693

Inventory turnover = 6.26

days of inventory on hand = number of days in a year/inventory turnover

days of inventory on hand = 365/6.26

days of inventory on hand = 58.31

Receivables turnover = Credit sales/receivables

Receivables turnover = 91199/6637.5

Receivables turnover = 13.74

days of sales outstanding = number of days in a year/receivables turnover

days of sales outstanding = 365/13.74

days of sales outstanding = 26.56

Accounts payables turnover = purchases/payables

Accounts payables turnover = 72139/8531

Accounts payables turnover = 8.46

days of payables outstanding = number of days in a year/inventory turnover

days of payables outstanding = 23/8.46

days of payables outstanding = 2.72

Operating cycle = days of sales outstanding + days of inventory on hand

Operating cycle = 26.56+58.31

Operating cycle = 84.87

Cash conversion cycle = Operating cycle - days of payables outstanding

Cash cycle = 84.87-2.72

Cash cycle = 82.15

jeff jeffy answered 1 year ago

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