Answer:
60.67 days and 35.02 days
Explanation:
The computation of the operating and cash cycles is shown below:
The operating cycle = Days inventory outstanding + days sale outstanding
where,
Day inventory outstanding = (Beginning inventory + ending inventory) ÷ 2 ÷ cost of goods sold × number of days in a year
= ($10,382 + $11,180) ÷ $87,113 × 365 days
= ($10,782 ÷ $87,113) × 365 days
= 45.17 days
Day sale outstanding = (Beginning Accounts receivable + ending Accounts receivable) ÷ 2 ÷ Net sales × number of days in a year
= ($5,651 + $6,181) ÷ 2 ÷ $139,303 × 365 days
= ($5,916 ÷ $139,303) × 365 days
= 15.50 days
Now put these days to the above formula
So, the days would equal to
= 45.17 days + 15.50 days
= 60.67 days
Now The cash cycle = Days inventory outstanding + days sale outstanding - days payable outstanding
where,
Day payable outstanding = (Beginning Accounts payable + ending Accounts payable) ÷ 2 ÷ cost of goods sold × number of days in a year
= ($5,952 + $6,293) ÷ $87,113 × 365 days
= ($6122.50 ÷ $87,113) × 365 days
= 25.65 days
Now put these days to the above formula
So, the days would equal to
= 45.17 days + 15.50 days - 25.65 days
= 35.02 days
