Consider the following financial statement information for the Bulldog Icers Corporation:

Item	Beginning						Ending
Inventory	$	12,000					$	13,000
Accounts receivable		7,000						7,300
Accounts payable		9,200						9,600
Net sales				$	100,000
Cost of goods sold					80,000

Calculate the operating and cash cycles. (Use 365 days a year. Do not round intermediate calculations and round your final answers to 2 decimal places. (e.g., 32.16))

Operating cycle	days
Cash cycle	days

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• ironman answered this

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  a. operating cycle

  i) Inventory turnover = Cost of Goods Sold/Avg. inventory = $80,000 /[($12,000 + $13,000)/2] = 6.40 times

  Inventory period = 365/Inventory turnover = 365/6.40 = 57.03 days

  ii) Receivables turnover = Sales/Avg. receivables = $100,000/[($7,000 + $7,300)/2]

  = 13.99 times

  Receivables period = 365/Receivables turnover = 365/13.99 = 26.09 days

  iii) Operating cycle = Inventory pd. + Receivables pd. = 57.03 days + 26.09 days = 83.12 days

  b. cash cycle

  i) Payables turnover = COGS/Avg. payables = $80,000/[($9,200 + $9,600)/2] = 8.51 times

  Payables period = 365/Payables turnover = 365/8.51 times = 42.89 days

  ii) Cash cycle = Operating cycle - Payables period = 83.12 days

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