Fresh Foods, Inc. has a cash cycle of 13.2 days, an operating cycle of 21 days, and an inventory period of 2 days. The company reported cost of goods sold in the amount of $280,000, and credit sales were $430,000. What is the company's average balance in accounts payable?

Question

Quizplus · Accepted Answer

The cash cycle is the operating cycle minus the accounts payable period. Given the cash cycle is 13.2 days and the operating cycle is 21 days, the accounts payable period is 21 - 13.2 = 7.8 days. The average accounts payable balance can be calculated using the formula: (Cost of Goods Sold / 365) * Accounts Payable Period. Thus, ($280,000 / 365) * 7.8 = $5,984.