Gonzalez Mercantile has an inventory turnover of 8.3,days' sales in receivables of 57,and an average payables turnover of 7.2.What is the cash cycle given a 365-day year?
A)50.28 days
B)58.04 days
C)55.00 days
D)49.29 days
E)61.37 days

Question

Quizplus · Accepted Answer

The cash cycle is calculated as the sum of the days' sales in inventory (DSI) and days' sales in receivables (DSR) minus the average payables period (APP). First, calculate DSI using the inventory turnover: DSI = 365 / Inventory Turnover = 365 / 8.3 = 43.98 days. Given DSR = 57 days and APP = 365 / Average Payables Turnover = 365 / 7.2 = 50.69 days, the cash cycle = DSI + DSR - APP = 43.98 + 57 - 50.69 = 50.29 days, which rounds to 50.28 days.

Gonzalez Mercantile Has an Inventory Turnover of 8