Question

Ives Corp. has an inventory period of 22.4 days, an accounts payable period of 36.5 days, and an accounts receivable period of 31.4 days. What is the company's cash cycle?

Answer 1

Answer:

The Company's cash cycle is 17.3 days

Explanation:

The cash cycle is computed by the following formula:

Receivable No of days+ Inventory No of days- Payables No of days

31.4 days + 22.4 days  - 36.5 days = 17.3 days

In the above question, Ives Corp is making an efficient operation of its cash resources. The payables are more than inventory, so the payables are financing the inventory as well as partly the receivables.