Question

Income statement dataSales 6,900Cost of goods sold 6,100Balance sheet dataInventory 680Accounts receivable 300Accounts payable 460Calculate the accounts receivable period accounts payable period, inventory period and cash conversion cycle for the above firm. Use 365 days in a year, do not round intermediate calculations. Round your answers to 1 decimal placea. accounts receivable period _____daysb. account payable period _____daysc. inventory period _____daysd. cash conversion cycle __

Answer 1

a. Accounts receivables period = 365 / (Credit sales/Average accounts receivables)

Accounts receivables period = 365 / (6900/300)

Accounts receivables period = 365 / 23

Accounts receivables period = 15.9 days

b. Accounts payable period = (365/(Cost of goods sold/Accounts payable)

Accounts payable period = 365 / (6100/460)

Accounts payable period = 365 / 13.26

Accounts payable period = 27.5 days

c. Inventory period = 365 / (Cost of goods sold/Inventory)

Inventory period = 365 / (6100/680)

Inventory period = 365 / 8.97

Inventory period = 40.7 days

d. Cash conversion cycle = Accounts receivables periods + Inventory period - Accounts payable periods

Cash conversion cycle = 40.7 + 15.9 - 27.5

Cash conversion cycle = 29.1 days