Assume all sales are on credit Calculate the operating and c

Assume all sales are on credit. Calculate the operating and cash cycles. (Do not round intermediate calculations. Round your answers to 2 decimal places (e.g., 32.16).)

Solution

Inventory turn over = cost of goods sold/average inventory

= 86613/[(9882+10680)/2] = 8.43 times

assuming 365 days a year

Inventory period = 365/inventory turnover = 365/8.43 = 43.30 days = 43 days

Account recivable turn over = Net sales/averageaccount recievable

= 138803/[(5151+5681)/2] = 25.63 times

recievable period = 365/recievable turnover = 365/25.63 = 14.24 = 14 days

Account payable turn over = cost of goods sold/averageaccount payable

= 86613/[(5452+5793)/2] = 15.41 times

payable period = 365/payable turnover = 365/15.41 = 23.69 = 24 days

Operating cycle = Inventory period + recievable period

= 43 + 14 = 57 days .....................ans

cash cycle = operating cycle - payable period

= 57 -24

= 33 days ....................ans