Question

What's the difference between days in inventory vs average collection period. They seem to have the same formula or am i missing something?

Answer #1

The **average collection period** is the
**average** number of days between 1) the date that a
credit sale is made, and 2) the date that the money is received
from the customer. The **average collection period**
is also referred to as the days' sales in accounts receivable. The
formula for the same is:

Average collection Period = 365 / Receivable turnover

The calculation of the days' sales in inventory is: the number
of days in a year (365 or 360 days) divided by the inventory
**turnover** ratio. So the formula comes to

Days in Inventory = 365 / Inventory Turnover Ratio.

Thus from we can see that both the formula has different denominators. In one case its Accounts Receivable turnover and on the other hand its the Inventory turnover.

A firm’s average age of inventory is 80 days, the average
collection period is 50 days.
a. With average payment
period of 70 days, compute Cash Conversion Cycle (CCC).
b. Explain
whether the CCC should be lengthened or shortened.

Hatfield donuts limited has an average payment period of 40
days, an average Collection period of 50 days, and turns its
inventory around 10 times per year if management is able to change
its average collection period favorable by 9 days. Calculate the
new cash conversion cycle

Nexus Enterprises has an inventory conversion period
of 50 days, an average collection period of 35 days and a payables
deferral period of 25 days. assume that cost of goods sold is 80%
of sales.
1 what is the length of the firms cash conversion
cycle?
2 if annual sales are 4380000 dollars and all sales
are on credit what is the firm's investment in accounts
receivable?
3 how many times per year does negus Enterprises turn
over its inventory?

Negus Enterprises has an inventory conversion period of 62 days,
an average collection period of 35 days, and a payables deferral
period of 36 days. Assume that cost of goods sold is 80% of sales.
Assume 365 days in year for your calculations.
What is the length of the firm's cash conversion cycle?
days
If Negus' annual sales are $3,705,000 and all sales are on
credit, what is the firm's investment in accounts receivable? Round
your answer to the nearest...

Zane Corporation has an inventory conversion period of 86 days,
an average collection period of 33 days, and a payables deferral
period of 38 days. Assume 365 days in year for your
calculations.
Length of the cash conversion cycle = 81 days
Zane's annual sales are $3,457,635 and all sales are on
credit.
The investment in accounts receivable is $312,608.09
How many times per year does Zane turn over its
inventory? Assume that the cost of goods sold is 75%...

Negus Enterprises has an inventory conversion period of 72 days,
an average collection period of 46 days, and a payables deferral
period of 25 days. Assume that cost of goods sold is 80% of sales.
Assume 365 days in year for your calculations.
A) What is the length of the firm's cash conversion cycle?
B) If Negus's annual sales are $3,523,450 and all sales are on
credit, what is the firm's investment in accounts receivable? Round
your answer to the...

Space Enterprises has an inventory conversion period of 55 days,
an average collection period of 44 days, and a payables deferral
period of 29 days. Assume that cost of goods sold is 80% of sales.
Assume 365 days in year for your calculations. What is the length
of the firm's cash conversion cycle? 62 days If Space's annual
sales are $3,432,450 and all sales are on credit, what is the
firm's investment in accounts receivable? Round your answer to the...

Negus Enterprises has an inventory conversion period of 62 days,
an average collection period of 45 days, and a payables deferral
period of 20 days. Assume that cost of goods sold is 80% of sales.
Assume 365 days in year for your calculations. What is the length
of the firm's cash conversion cycle? days
If Negus's annual sales are $3,824,775 and all sales are on
credit, what is the firm's investment in accounts receivable? Round
your answer to the nearest...

TCBW last year had an average collection period (days sales
outstanding) of 29 days based on accounts receivable of $530,000.
All of the firm's sales are made on credit. The firm expects sales
this year to be the same as last year. However, the company has
begun a new credit policy that should lower the average collection
period to 22 days. If the new average collection period is
attained, what will the firm's accounts receivable balance equal?
(Round your answer...

4- Interior Designs has a days sales in inventory of 51 days, an
average payment period of 38 days, and an average collection period
of 32 days. Management is considering an offer from their suppliers
to pay within 10 days and receive a 2 percent discount. If the new
discount is taken, the average payment period is expected to
decline by 26 days. If the new discount is taken, the operating
cycle will be _____ days. If new discount is...

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