Question

inventory: beginning $21,430 Ending $23,865
Accounts receivable: beginning $15,362 Ending $17,210
accounts payable: beginning $20,416 Ending $21,803
net sales for the year: $243,612
cost of goods sold for the year: $108,915

what is the cash cycle?

Answer 1

Ans.	Cash cycle =   Days sales in inventory + Days sales in receivables - Payable period
		75.90 + 24.60 - 69.20
		31.30	days
	*Calculations:
	Days sales in inventory = Average inventory / Cost of goods sold * No. of days in year
			22647.5 / 108915 * 365
			75.90	days
	*Average inventory = (Beginning inventory + Ending inventory) / 2
			(21430 + 23865) / 2
			22647.5
	Days sales in receivables = Average receivables / Sales * No. of days in year
			16421 / 243612 * 365
			24.60	days
	*Average receivables = (Beginning receivables + Ending receivables) / 2
			(15632 + 17210) / 2
			16421
	*Payable period = Average payable / Purchase * No. of days in year
		21109.5 / 111350 * 365
		69.20	days
	*Average payable = (Beginning payable + Ending payable) / 2
			(20416 + 21803) / 2
			21109.5
	*Purchase   =   Cost of goods sold + Ending inventory - Beginning inventory
		108915 + 23865 - 21430
		111350

*Payable period can also be determined by using the following formula:

Average payable / Cost of goods sold * No. of days in year