Question

In: Finance

Suppose the following: Beginning Inventory = 11202 Ending Inventory= 12259 Beginning Receivables = 6123 Ending Receivables...

Suppose the following:

Beginning Inventory = 11202
Ending Inventory= 12259

Beginning Receivables = 6123
Ending Receivables = 6623

Beginning Payables = 8425
Ending Payables = 8827

Credit Sales = 91254
Cost of Goods Sold = 72320

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

Operating Cycle = days
Cash Cycle = days

Expert Solution

The correct answer is:

Operating Cycle = 84.69 days
Cash Cycle = 41.16 days

Note:

Average Inventory = (Opening Inventory +Ending Inventory)/2

Average Receivables = (Opening Receivables +Ending Receivables)/2

Operating Cycle = Inventory Period + Receivables Period

= [365/ Inventory Turnover] +[365/Receivables Turnover]

= [365/ (Cost of Goods Sold/Average Inventory)] + [365/(Net Sales/Average Receivables)]

= [365/( 72320/11731)] + [365/(91254/6373)]

= 84.69

Cash Cycle =Operating Cycle - Payable Period

= 84.69 - [365/Payable Turnover]

=84.69- [365/(Cost of Goods Sold/Average Payable)]

= 84.69- [365/( $ 72320/8626)]

=41.16

Average Payable = (Opening Payable +Closing Payable) /2

jeff jeffy answered 2 years ago

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