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
