Homework SourseYou have the following balance sheet and income statement in
You have the following balance sheet and income statement information for Epic Corp.:
All sales and purchases were on credit.
1. How long is the days\' sales in inventory (in days)?
2. How long is the average collection period (in days)?
3. How long is the average payment period (in days)?
4.How long is the cash cycle (in days)?
| Balance sheet | $ |
| Accounts receivable (A/R) | 2,200 |
| Inventory | 3,400 |
| Accounts payable (A/P) | 870 |
Solution
1. Days Sales in inventory = Inventory/(COGS/365) = 3400/(5440/365) = 228.125 days
2. Average Collection Period = Amount Receivables/( Sales/365) = 2200/(6800/365) = 118.088 days
3. Average Payment Period = Amount Payable/( COGS/365) = 870/(5440/365) = 58.373 days
4. Cash Cycle = Days Sales in inventory + Average Collection Period days - Average Payment Period days = 228.125 + 118.088 - 58.373 = 287.84
Best of Luck. God Bless
