inventory: beginning $21,430 Ending $23,865 Accounts receivable: beginning $15,362 Ending $17,210 accounts payable: beginning $20,416 Ending...

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?

Expert Solution

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

jeff jeffy answered 2 years ago

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