Genovese Fine Foods, a manufacturer of foodstuffs, buys Durham wheat flour on credit on 1 June. It processes this flour to make pasta on 6 June and pays cash for the flour on 15 June. On 22 June it sells the pasta to a chain of supermarkets, and on 3 July receives cash payment for this sale. What is the length of the cash cycle in this case?

Question

Quizplus · Accepted Answer

The cash cycle is the number of days between the payment for raw materials and the receipt of cash from selling finished goods. In this case, Genovese Fine Foods buys the flour on credit on 1 June, processes it on 6 June, pays cash on 15 June, sells the pasta on 22 June, and receives cash payment on 3 July. The length of the cash cycle is therefore 18 days (from 15 June to 3 July).

Genovese Fine Foods, a Manufacturer of Foodstuffs, Buys Durham Wheat