A. What is the cash cycle for White Bluffs, Inc. if all sales are credit sales.
B. If you knew that Accounts Payables were $4884 last year, what effect would this have on your estimate of the cash cycle. Show and explain why.
A. See answer for question 52 for Days in Inventory and Receivables.
Accounts Payables Turnover = CGS/Accounts Payables = 28461/2754 = 10.334.
Days in Payables = 365/10.334 = 35.32.
Cash Cycle = 124.39 - 35.32 = 89.07.
B. Average Accounts Payable = (4884 + 2754)/2 = 3819.
Accounts Payable Turnover = 28461/3819 = 7.452
Days in Accounts Payable = 365/7452 = 48.98.
Cash Cycle = 124.39 - 48.98 = 75.41.
- Cash Cycle would be lower, which is better because White Bluffs has greater use of trade financing.
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