Wislon, Inc. has an inventory turnover rate of 15, an accounts payable period of 54 days and an accounts receivable period of 37 days. What is the length of the cash cycle?

Question

Quizplus · Accepted Answer

The cash cycle is calculated as the inventory period plus the accounts receivable period minus the accounts payable period. First, we need to find the inventory period. The inventory turnover rate is 15, which means the inventory turns over 15 times a year. The inventory period can be calculated as 365 days divided by the inventory turnover rate, which is 365 / 15 = 24.33 days. Adding the accounts receivable period of 37 days gives us 61.33 days. Subtracting the accounts payable period of 54 days results in a cash cycle of 7.33 days.