Blue Moon Corporation's Balance Sheet and Income Statement as shown below: Blue Moon Corporation's cash cycle for 2011 is:

Question

Blue Moon Corporation's Balance Sheet and Income Statement as shown below:   Blue Moon Corporation's cash cycle for 2011 is:

Quizplus · Accepted Answer

To calculate the cash cycle, we need to add the inventory conversion period and receivables collection period, then subtract the payables deferral period.

Inventory conversion period = 365 / Cost of goods sold / Average inventory = 365 / 586.9 / [(238 + 284.5) / 2] = 39.27 days

Receivables collection period = 365 / Net sales / Average accounts receivable = 365 / 920 / [(78.5 + 84.5) / 2] = 42.04 days

Payables deferral period = 365 / Cost of goods sold / Average accounts payable = 365 / 586.9 / [(65.5 + 63.5) / 2] = 5.39 days

Cash cycle = Inventory conversion period + Receivables collection period - Payables deferral period = 39.27 + 42.04 - 5.39 = 95.92 days

Therefore, the answer is C.

Blue Moon Corporation's Balance Sheet and Income Statement as Shown