Question

# Consider the following financial statement information for the Hop Corporation: Item Beginning Ending Inventory \$11900   \$12900...

Consider the following financial statement information for the Hop Corporation:

Item Beginning Ending Inventory

\$11900   \$12900

Account

Receivable \$6900 \$7200

Accounts

Payable \$9100 \$9500

Net Sales \$99000

Cost of

Goods Sold \$79000

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

Operating Cycle: days

Cash Cycle: days

Given

 Particular Ending Beginning Average Inventory 12900 11900 12400 Accounts receivable 7200 6900 7050 Accounts payable 9500 9100 9300 Net sales 99000 99000 Cost of Goods sold 79000 79000

Inventory turnover ratio = COGS/Avg. inventory = 79000/12400 = 6.37

Accounts receivable turnover = Sales/Avg Accounts receivable = 99000/7050 = 14.04

Accounts payable turnover = COGS/Avg Accounts payable = 79000/9300 = 8.49

So, Days inventory outstanding = 365/Inventory turnover = 365/6.37 = 57.29 days

Days sales outstanding = 365/Accounts receivable turnover = 365/14.04 = 25.99 days

Days Payable periods = 365/Accounts payable turnover = 365/8.49 = 42.97 days

So, Operating cycle = DIO + DSO = 57.29 + 25.99 = 83.58 days

Cash cycle = Operating cycle - DPP = 83.58-42.97 = 40.31 days

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