Question

A company has an inventory period of 21.8 days, an A/P period of 32.7 days, and an A/R period of 29.6 days. In days, first find the company's cash cycle. Next, find its operating cycle.

Answer 1

The company's cash cycle is -10.9 days and its operating cycle is 51.4 days.

Step-by-step explanation:

The cash cycle is the time it takes for a company to convert its inventory into cash. It is calculated by subtracting accounts payable (A/P) period from the operating cycle. In this case, the company's cash cycle is 21.8 days - 32.7 days = -10.9 days.

The operating cycle is the time it takes for a company to convert its inventory into accounts receivable (A/R). It is calculated by adding the inventory period to the A/R period. In this case, the company's operating cycle is 21.8 days + 29.6 days = 51.4 days.