Answer:
Cash conversion cycle = 41.67
Operating Cycle = 86.03
Explanations:
Average Invetory = (10500 + 11500)/2 = 11,000.00
Average accounts receivable(AR) = (5500 + 5800)/2 = 5,650.00
Average Accounts payable (AP)= (7700 + 8100)/2 = 7,900.00
Credit Sales = 85,000.00
AR Turnover = 85000/5650 = 15.04
Days sales outstanding = 365/ 15.04 = 24.26
Cost of goods sold = 65,000.00
AP turnover = 65000/7900 = 8.23
Days payable outstanding = 365/8.23 = 44.36
Inventory turnover= 65000/11000 = 5.91
Days inventory O/S = 365/5.91 = 61.77
Cash conversion cycle = Days Inventory outstanding + days Sales o/S - Days Payable O/S = 61.77 + 24.26 - 44.36 = 41.67
Operating Cycle = Days' Sales of Inventory + Days Sales Outstanding 61.77 + 24.26 = 86.03
