Item Beginning Ending Sum Average Inventory 9,780 11,380 21,160 10580 Accounts r

Question

Item Beginning Ending Sum Average
Inventory 9,780 11,380 21,160 10580
Accounts receivable 4,108 4,938 9,046 4523
Accounts payable 7,636 7,927 15,563 7781.5
Credit sales 89,804
Cost of goods sold 56,384




Calculate the operating and cash cycles.
Operating Cycle Calculation: Inventory period+Accounts Receivable Period:
Cash Cycle Calculation: Operating Cycle-Accounts Payable Period:

Operating Cycle:
Inventory Period
Average Inventory= 9,780+11,380=21,160/2=$10,580
Inventory Turnover= 56,384/10,580=5.33 Times
Inventory Period= 365/5.33= 68 days

Receivables Period
Average Receivables= Average Receivable: 4,108+4,938=9,046/2=4,523
Receivables turnover= Cost of goods sold 56,386/Average Receivables 4,523=12.46 times
Receivables Period= 365/12 =30 days
Operating Cycle= Inventory Period 68 days + Receivables Period days 30=98 days

Cash Cycle:
Average Payables: Accts Payable Beg. 7,636+ end: 7,927=15,563/2=7,781.50
Payables Turnover=Cost of goods sold 56,384/7,781.50=7.25 Times
Payables Period=365/7.25= 50 days
Cash Cycle=98 days (op cycle)- 50 days payable period=48 days

Explanation / Answer

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