Consider the following financial statement information for the Amaryliss Corpora
ID: 2714293 • Letter: C
Question
Consider the following financial statement information for the Amaryliss Corporation: Item Beginning Ending Inventory $9,782 $10,580 Accounts receivable 5,051 5,581 Accounts payable 5,352 5,693 Net sales $138,703 Cost of goods sold 86,513 Consider the following financial statement information for the Amaryliss Corporation: Item Beginning Ending Inventory $9,782 $10,580 Accounts receivable 5,051 5,581 Accounts payable 5,352 5,693 Net sales $138,703 Cost of goods sold 86,513Explanation / Answer
The operating cycle = Inventory days + Receivables days
Inventory turnover = COGS/Average inventory
Inventory turnover = $86513/[($9782 + 10580)/2]
Inventory turnover = 8.497 times
Inventory period = 365 days/Inventory turnover
Inventory period = 365 days/8.497
Inventory period = 42.95 days
Receivables turnover = Credit sales/Average receivables
Receivables turnover = $138703/[($5051 + 5581)/2]
Receivables turnover = 26.09 times
Receivables period = 365 days/Receivables turnover
Receivables period = 365 days/25.102
Receivables period = 13.99 days
So, the operating cycle is:
Operating cycle = 42.95days + 13.99 days
Operating cycle = 56.94 days
cash cycle = operating cycle - Payables period.
Payables turnover = COGS/Average payables
Payables turnover = $86513/[$5352 + 5693)/2]
Payables turnover = 15.65 times
Payables period = 365 days/Payables turnover
Payables period = 365 days/15.65
period = 23.32 days
Cash cycle = 56.94 days – 23.32 days
Cash cycle = 33.62 days
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