Consider the following financial statement information for the Rivers Corporatio
ID: 2745246 • Letter: C
Question
Consider the following financial statement information for the Rivers Corporation:
Item
Beginning
Ending
Inventory
$
11,900
$
12,900
Accounts receivable
6,900
7,200
Accounts payable
9,100
9,500
Net sales
$
99,000
Cost of goods sold
79,000
Calculate the operating and cash cycles. (Use 365 days a year. Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)
Operating cycle
days
Cash cycle
days
Consider the following financial statement information for the Rivers Corporation:
Item
Beginning
Ending
Inventory
$
11,900
$
12,900
Accounts receivable
6,900
7,200
Accounts payable
9,100
9,500
Net sales
$
99,000
Cost of goods sold
79,000
Calculate the operating and cash cycles. (Use 365 days a year. Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)
Operating cycle
days
Cash cycle
days
Explanation / Answer
Accounts receivable turnover = Net sales / Average accounts receivable = $ 99,000 / $ ( 6,900 + 7,200) / 2 = 14.04
Average collection period = 365 / 14.04 = 25.99 days
Inventory turnover = Cost of goods sold / Average inventory = $ 79,000 / $ ( 11,900 + 12,900) / 2 = 6.37
Inventory conversion period = 365 / 6.37 = 57.29 days
Accounts payable turnover = Cost of goods sold / Average accounts payable = $ 79,000 / $ ( 9,100 + 9,500) / 2 = 8.50
Average payment period = 365 / 8.5 = 42.94 days
Operating cycle = Average collection period + Inventory conversion period = 25.99 days + 57.29 days = 83.28 days
Cash cycle = Operating cycle - Average payment period = 83.28 days - 42.94 days = 40.34 days
Operating cycle 83.28 days Cash cycle 40.34 daysRelated Questions
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