Youve collected the following information about your company

You\'ve collected the following information about your company:

All sales and purchases were on credit.

1. How long is the operating cycle (in days)?
2. How long is the cash cycle (in days)?

Solution

Operating Cycle: Day\'s Sales in Inventory + Average Collection Period

Operating Cycle = 10 + 52 = 62 Days

Cash to Cash Cycle: Day\'s Sales in Inventory + Average Collection Period - Average Payment Period

Cash to Cash cycle = 10 + 52 - 35 = 27 days