In: Finance
Account |
Beginning Balance |
Ending Balance |
Inventory |
$2,600 |
$2,890 |
Accounts receivable |
$3,222 |
$2,800 |
Accounts payable |
$2,500 |
$2,670 |
Net sales |
$24,589 |
|
Cost of goods sold |
$19,630 |
What is the operating cycle?
a. |
51.04 days |
|
b. |
95.74 days |
|
c. |
48.07 days |
|
d. |
99.11 days |
a. |
44.70 days |
|
b. |
48.07 days |
|
c. |
47.67 days |
|
d. |
51.04 days |
Average inventory = ( beginning inventory + ending inventory)/2 |
Average inventory = (2600+2890)/2 |
Average inventory = 2745 |
Average Receivables= ( beginning Receivables+ ending Receivables)/2 |
Average Receivables = (3222+2800)/2 |
Average Receivables = 3011 |
Average Payables= ( beginning Payables+ ending Payables)/2 |
Average Payables = (2500+2670)/2 |
Average Payables = 2585 |
Inventory turnover = COGS/inventory |
Inventory turnover = 19630/2745 |
Inventory turnover = 7.15 |
days of inventory on hand = number of days in a year/inventory turnover |
days of inventory on hand = 365/7.15 |
days of inventory on hand = 51.05 |
Receivables turnover = Credit sales/receivables |
Receivables turnover = 24589/3011 |
Receivables turnover = 8.17 |
days of sales outstanding = number of days in a year/receivables turnover |
days of sales outstanding = 365/8.17 |
days of sales outstanding = 44.68 |
Accounts payables turnover = COGS/payables |
Accounts payables turnover = 19630/2585 |
Accounts payables turnover = 7.48 |
days of payables outstanding = number of days in a year/accounts payable turnover |
days of payables outstanding = 365/7.48 |
days of payables outstanding = 48.8 |
Operating cycle = days of sales outstanding + days of inventory on hand |
Operating cycle = 44.68+51.05 |
Operating cycle = 95.73 |
Cash conversion cycle = Operating cycle - days of payables outstanding |
Cash cycle = 95.73-48.09 |
Cash cycle = 47.64 |