The inventory turnover for the Lambkin Company was 8 times and its days in receivables was 65.The average payables deferral period (or turnover)was 7.5.What is the cash cycle for Lambkin given a 365-day year?

Question

Quizplus · Accepted Answer

Cash Cycle = Days in Inventory + Days in Receivables - Days in Payables

Days in Inventory = 365 / Inventory Turnover = 365/8 = 45.625 days
Days in Receivables = 65 days
Days in Payables = 365 / Payables Turnover = 365 / 7.5 = 48.67 days (average payment period)

Therefore, Cash Cycle = 45.625 + 65 - 48.67 = 61.96 days.

The correct answer is B.

The Inventory Turnover for the Lambkin Company Was 8 Times