Question

In: Finance

Account Beginning Balance Ending Balance Inventory $2,600 $2,890 Accounts receivable $3,222 $2,800 Accounts payable $2,500 $2,670...

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

Following Question 1, what is the cash cycle?

	a.	44.70 days
	b.	48.07 days
	c.	47.67 days
	d.	51.04 days

Expert Solution

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

jeff jeffy answered 2 years ago

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