Question

please show work

1) COP Communications has an inventory period of 43 days, an accounts payable period of 36 days, and an accounts receivable turnover rate of 28. What is the length of the cash cycle? (Assume a 365-day year)

2) As of the beginning of the quarter, O’Neill’s Pub Supplies had a cash balance of $10,660. During the quarter, the company collected $12,500 from customers and paid suppliers $12,330. The company also paid an interest payment of $750 and an income tax payment of $1,000. In addition, the company repaid $1,525 on its long-term debt. What is O’Neill’s cash balance at the end of the quarter?

Answer 1

1) Cash Cycle = Inventory Period + Accounts receivable period + Accounts payable period

We know two of these, just have to compute Accounts receivable period.

Accounts receivable turnover = Sales / Accounts receivable

Accounts receivable period = (Accounts receivable / Sales) x 365 days

or, Accounts receivable period = (1 / Accounts receivable turnover) x 365 days

or, Accounts receivable period = (1 / 28) x 365 days = 13.03571429 days or 13 days

Cash Cycle = 43 days + 13 days - 36 days = 20 days

2)

Beginning Balance	$10,660
Add: Cash collections from customers	$12,500
Less: Payments
Paid to suppliers	$12,330
Interest	$750
Income tax	$1,000
Long - term debt	$1,525
Ending cash balance	$7,555