Homework Answers
Ans :
11. Operating cycle = Inventory period + account receivables period.
= 62.9919 days + 23.8140 days (Note 1 and 2)
= 86.8059 days
Cash cycle = Operating cycle – Payable period .
= 86.8059 days - 44.7419 days
= 42.0639 days
Note 1: Inventory turnover = COGS / Average inventory
= $ 62,000 / ($ 10,200 + $ 11,200) /2
= $ 62,000 / $ 10,700
= 5.79439
Inventory period = 365/inventory turnover ratio
= 365 / 5.79439
= 62.9919 days
Note 2: Receivable turnover = Credit sales/ average receivable
= $ 82,000 /(5200+5500)/2
= 82,000/5350
= 15.32710
Receivable period = 365 days / Receivable turnover
= 365 / 15.32710
= 23.8140 days
Note3: Payable turnover = COGS/average payable
= $ 62,000 / (7400+7800)/2
= 62,000/ 7600
= 8.15789
Payable period = 365 days / payable turnover
= 365 / 8.15789
= 44.7419 days
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