Question

you are a consultant for paschkle consulting services. your client, mr. r scott, the ceo of lear corp, has provided the following information about his firm: lear Corp. has sales of 19, 810.3 million with costs of goods sold of $18, 072.8M. The average inventory is $1,227,5M, accounts payable average $2,842.23M, and receivables average $2,931.45M. Assume a 365- day year. you are asked to calculate the operating and cash cycle for Lear Corp.

Answer 1

Inventory period = ( Average inventory / Cost of goods sold ) * Days in a year = ( 1227.5/18072.8 ) * 365	24.8
Accounts receivables period = ( Average accounts receivables / Net sales ) * Days in a year = ( 2931.45 / 19810.3 ) * 365	54.0
Accounts payable period = ( Average accounts payable / Cost of goods sold ) * Days in a year = ( 2842.23 / 18072.8 ) * 365	57.4
Operating cycle = Inventory period + Accounts receivables period = 24.8 + 54.0	78.8
Cash conversion cycle = Inventory period + Accounts receivable period - Accounts payable period = 24.8 + 54.0 - 57.4	21.4