ABC Company

Using the following information and assume 365 in a year.

Inventory = $100,000

Sales = $500,000 (Assume all credit sales)

Accounts receivable = $50,000

Accounts payable = $25,000

Cost of goods sold = $365,000

(a) Calculate the Inventory Period.

(b) Calculate the Accounts Receivable Period.

(c) Calculate the Accounts Payable Period.

(d) What is the Cash Cycle of the firm?

(e) If ABC Company wants to reduce its Cash Cycle, should the company start paying its bills for credit purchases sooner (YES or NO)? Assume that Inventory Period, Accounts Receivable Period and Operating Cycle remain unchanged.