Sales (all credit): $6,000,000; Cost of Goods Sold: 80% of Sales; Accounts receivable: $350,000; Inventory: $600,000;...

Sales (all credit): $6,000,000; Cost of Goods Sold: 80% of Sales; Accounts receivable: $350,000; Inventory: $600,000; Accounts payable: $150,000 What is the Working Capital Cycle? Use 1 year = 365 days

		11 days.
		46 days.
		22 days
		56 days.

Expert Solution

Working Capital Cycle = 56 days.

Working Capital Cycle (WCC) = Days receivable outstanding + Days inventory outstanding - Days payable outstanding

Formula
	Sales	60,00,000
80% of sales	COGS	48,00,000
	Accounts receivable (AR)	3,50,000
	Inventory (I)	6,00,000
	Accounts Payable (AP)	1,50,000
(AR/Credit sales)*365	Days receivable (DRO)	21
(I/COGS)*365	Days inventory (DIO)	46
(AP/COGS)*365	Days payable (DPO)	11
(DRO+DIO-DPO)	Working Capital Cycle	56

jeff jeffy answered 1 year ago

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