The inventory turnover for the Lambkin Company was 8 times and its days in receivables was 55.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

The cash cycle is the sum of the days in receivables, the average payables deferral period, and the inventory turnover period. The inventory turnover period is calculated by dividing 365 days by the inventory turnover ratio. Therefore, the inventory turnover period for Lambkin is 365 days / 8 = 45.63 days. The cash cycle is then calculated as 55 days + 45.63 days + (365 days / 7.5) = 51.96 days.

The Inventory Turnover for the Lambkin Company Was 8 Times