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Pasta Shop has sales of $315,000, average accounts receivable of $32,000, average inventory of $28,000 and...
Pasta Shop has sales of $315,000, average accounts receivable of $32,000, average inventory of $28,000 and average accounts payable of $24,000. The cost of goods sold is equivalent to 70 percent of sales. What is the operating cycle? What is the cash cycle?
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Expert Solution
ANSWER : OPERATING CYCLE = 83.43 DAYS & CASH CYCLE = 43.7 DAYS
Sales = $315,000
Avg. accounts receivable = $32,000
Avg. inventory = $28,000
Avg. accounts payable = $24,000
Cost of goods sold (COGS) = 70% of sales = 0.70 * 315,000 = $220,500
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