Question

You have the following balance sheet and income statement information for Epic Corp.: Balance sheet $...

You have the following balance sheet and income statement information for Epic Corp.:

Balance sheet $
Accounts receivable (A/R) 2,200
Inventory 3,400
Accounts payable (A/P) 870
Income statement $
Sales 6,800
Cost of goods sold (COGS) 5,440

All sales and purchases were on credit.
1. How long is the days' sales in inventory (in days)?
2. How long is the average collection period (in days)?
3. How long is the average payment period (in days)?
4.How long is the cash cycle (in days)?

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Homework Answers

Answer #1

1. Days Sales in inventory = Inventory/(COGS/365) = 3400/(5440/365) = 228.125 days

2. Average Collection Period = Amount Receivables/( Sales/365) = 2200/(6800/365) = 118.088 days

3. Average Payment Period = Amount Payable/( COGS/365) = 870/(5440/365) = 58.373 days

4. Cash Cycle =   Days Sales in inventory + Average Collection Period days - Average Payment Period  days =  228.125 + 118.088 -  58.373 = 287.84

Best of Luck. God Bless

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