Consider the following financial statement information for the Zacee Corporation
ID: 2716323 • Letter: C
Question
Consider the following financial statement information for the Zacee Corporation for 2013:
Items
Beginning
Ending
Inventory
$7,708
$7,866
Accounts Receivable (A/R)
$87,309
$92,819
Accounts Payable (A/P)
$19,531
$20,035
Credit Sales
$144,077
Cost of Goods Sold (COGS)
$126,215
What is the cash cycle?
80 days
251 days
285 days
308 days
193 days
Items
Beginning
Ending
Inventory
$7,708
$7,866
Accounts Receivable (A/R)
$87,309
$92,819
Accounts Payable (A/P)
$19,531
$20,035
Credit Sales
$144,077
Cost of Goods Sold (COGS)
$126,215
Explanation / Answer
Answer:
Cash Conversion Cycle = Days sales outstanding + days inventory outstanding - days payable outstanding
Sales outstanding = Average account receivable /credit sales *365
= 90064/144077*365 = 228.16
Inventories outstanding = Average inventory /Cost of good sold *365
= 7787/126215 *365 = 22.51
Days payable outstanding = Payable /Cost of goods sold *365
=19783/126215 *365 = 57.21
Hence the cash cycle = 228.12+22.51-57.21 = 193.47
Thank You
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