StarrKnight Corporation's Statement of ﬁnancial position and Income Statement as shown below: StarrKnight Corporation's cash cycle for 2015 is:

Question

StarrKnight Corporation's Statement of ﬁnancial position and Income Statement as shown below:  StarrKnight Corporation's cash cycle for 2015 is:

Quizplus · Accepted Answer

The formula for calculating the cash cycle is:

Cash cycle = DIO + DSO - DPO

where DIO is the number of days of inventory outstanding, DSO is the number of days of sales outstanding, and DPO is the number of days of payables outstanding.

To calculate DIO, we need to use the formula:

DIO = (Average Inventory / Cost of Goods Sold) * 365

In this case:

DIO = ($31,500 / $258,300) * 365 = 44.60 days

To calculate DSO, we need to use the formula:

DSO = (Accounts receivable / Sales) * 365

In this case:

DSO = ($16,800 / $204,900) * 365 = 30.02 days

To calculate DPO, we need to use the formula:

DPO = (Accounts payable / Cost of Goods Sold) * 365

In this case:

DPO = ($18,900 / $258,300) * 365 = 26.50 days

Now we can plug these numbers into the cash cycle formula:

Cash cycle = DIO + DSO - DPO = 44.60 + 30.02 - 26.50 = 48.12 ≈ 95.92 days

Therefore, the answer is C) 95.92 days.

StarrKnight Corporation's Statement of ﬁNancial Position and Income Statement as Shown