Consider the following financial statement information for the Bulldog Icers Cor

Question

Consider the following financial statement information for the Bulldog Icers Corporation:

Calculate the operating and cash cycles. (Use 365 days a year. Do not round intermediate calculations and round your final answers to 2 decimal places. (e.g., 32.16))

Consider the following financial statement information for the Bulldog Icers Corporation:

Item Beginning Ending   Inventory $ 12,000 $ 13,000   Accounts receivable 7,000 7,300   Accounts payable 9,200 9,600      Net sales $ 100,000      Cost of goods sold 80,000

Calculate the operating and cash cycles. (Use 365 days a year. Do not round intermediate calculations and round your final answers to 2 decimal places. (e.g., 32.16))

  Operating cycle days   Cash cycle days

Explanation / Answer

a. operating cycle

i) Inventory turnover = Cost of Goods Sold/Avg. inventory
= $80,000 /[($12,000 + $13,000)/2]
= 6.40 times

Inventory period = 365/Inventory turnover
= 365/6.40
= 57.03 days

ii) Receivables turnover = Sales/Avg. receivables
= $100,000/[($7,000 + $7,300)/2]

= 13.99 times

Receivables period = 365/Receivables turnover
= 365/13.99
= 26.09 days

iii) Operating cycle = Inventory pd. + Receivables pd.
= 57.03 days + 26.09 days
= 83.12 days

b. cash cycle

i) Payables turnover = COGS/Avg. payables
= $80,000/[($9,200 + $9,600)/2]
= 8.51 times

Payables period = 365/Payables turnover
= 365/8.51 times
= 42.89 days

ii) Cash cycle = Operating cycle - Payables period
= 83.12 days

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