Calvani, Inc., has a cash cycle of 44 days, an operating cycle of 64 days, and a

Question

Calvani, Inc., has a cash cycle of 44 days, an operating cycle of 64 days, and an inventory period of 27.5 days. The company reported cost of goods sold in the amount of $343,000, and credit sales were $566,000.

What is the company’s average balance in accounts payable and accounts receivable? (Do not round intermediate calculations. Round your answers to 2 decimal places (e.g., 32.16).)

Calvani, Inc., has a cash cycle of 44 days, an operating cycle of 64 days, and an inventory period of 27.5 days. The company reported cost of goods sold in the amount of $343,000, and credit sales were $566,000.

Explanation / Answer

Operating Cycles = Days' Sales of Inventory + Days Sales Outstanding Days Sales Outstanding = 64 - 27.5 = 36.5 Days Cash Conversion Cycles = Days' Sales of Inventory + Days Sales Outstanding - Days Payable O/S 44 = 27.5 + 36.5 - Days Payable O/S Days Payable O/S = 64-44 = 20 AverageAP = 343,000/365*20 =$18,794.52 AverageAR= 566,000/365 * 36.5 = 55,600

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