Jordan and Sons has an inventory period of 48.6 days,an accounts payable period of 36.2 days,and an accounts receivable period of 29.3 days.Management is considering offering a discount of 5 percent if its credit customers pay for their purchases within 10 days.This discount is expected to reduce the receivables period by 17 days.If the discount is offered,the operating cycle will decrease from ________ days to ________ days.

Question

Quizplus · Accepted Answer

The operating cycle is calculated as the inventory period plus the accounts receivable period. Initially, it is 48.6 days + 29.3 days = 77.9 days. If the receivables period is reduced by 17 days, the new receivables period is 29.3 days - 17 days = 12.3 days. The new operating cycle is 48.6 days + 12.3 days = 60.9 days.

Jordan and Sons Has an Inventory Period of 48