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Nuetrik [128]
3 years ago
8

Consider the following financial statement information for the Sourstone Corporation: Item Beginning Ending Inventory $11,482 $1

2,280 Accounts receivable 6,751 7,281 Accounts payable 7,052 7,393 Net sales $140,403 Cost of goods sold 88,213 Assume all sales are on credit. Calculate the operating and cash cycles.
Business
1 answer:
Nadusha1986 [10]3 years ago
4 0

Answer:

The operating and cash cycles is 134.80 days and 75.04 days respectively.

Explanation:

The computation of the operating and the cash cycle is shown below:

The operating cycle = Days inventory outstanding + days sale outstanding

where,

Day inventory outstanding = (Beginning inventory + ending inventory) ÷ cost of goods sold × number of days in a year

= ($11,482 + $12,280) ÷ $88,213 × 365 days

= ($23,762 ÷ $88,213) × 365 days

= 98.32 days

Day sale outstanding = (Beginning  Accounts receivable + ending Accounts receivable) ÷  Net sales × number of days in a year

= ($6,751 + $7,281) ÷ $140,403 × 365 days

= ($14,032 ÷ $140,403) × 365 days

= 36.48 days

Now put these days to the above formula  

So, the days would equal to

= 98.32 days + 36.48 days

= 134.80 days

Now The cash cycle = Days inventory outstanding + days sale outstanding - days payable outstanding

where,

Day payable outstanding = (Beginning Accounts payable + ending Accounts payable) ÷  cost of goods sold  × number of days in a year

= ($7,052 + $7,393) ÷ $88,213 × 365 days

= ($14,445 ÷ $88,213) × 365 days

= 59.76 days

Now put these days to the above formula  

So, the days would equal to

= 98.32 days + 36.48 days - 59.76 days

= 75.04 days

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