Answer:
34.76 days
Explanation:
From the above question, we have the following information:
DAWAR Corporation
Annual sales = $45,000
Annual cost of goods sold = $31,500 Inventory = $4,000
Accounts receivable = $2,000
Accounts payable = $2,400.
We are assuming 365 days.
Step 1
Find Days Inventory Outstanding (DIO)
Formula :
(Inventory ÷ Cost of goods sold) × Number of days
(4,000 ÷ 31,500) × 365
= 46.349206349 days
Approximately ≈ 46.35 days
Step 2
Find Days Sales Outstanding (DSO)
Formula = (Accounts receivable ÷ Revenue) × Number of days
Revenue = Annual sales
= (2,000 ÷ 45,000) × 365 days
= 16.222222222 days
Approximately ≈ 16.22 days
Step 3
Find Days Payable Outstanding (DPO)
Formula = (Accounts payable ÷ Cost of goods sold) × Number of days
= (2,400 ÷ 31,500) × 365 days
= 27.80952381 days.
Approximately ≈ 27.81 days
Step 4
Formula for Cash Conversion Cycle
= Days Inventory Outstanding (DIO) + Days Sales Outstanding (DSO - Days Payable Outstanding (DPO)
= 46.35 days + 16.22 days - 27.81 days.
= 62.57 days - 27.81 days
= 34.76 days
The Cash Conversion Cycle approximately to the nearest whole number = 34.76 days
