Given the following information, calculate the cash cycle

Computation of Cash Cyle:

Inventory Turnover = Cost of Goods sold / Average Inventory

Here,

Average Inventory = ($300,000 + $280,000)/ 2 = $290,000

Inventory Turnover = $750,000 / $290,000 = 2.59 times

Days Inventory Outstanding = Average Inventory * 365 / Cost of Goods sold = $290,000 * 365 / $750,000 = 141.13 days

Days Sales Outstanding = Average Accounts Receivable * 365 / Net Credit Sales

Here,

Average Accounts Receivable = ($280,000 + $250,000) / 2 = $265,000

Net Credit Sales = $1,000,000

Days Sales Outstanding = $265,000 * 365 / $1,000,000 = 96.73 days

Days Payable Outstanding = Average Accounts Payable * 365 / Cost of Goods sold

Here,

Average Accounts Payable = ($260,000 + $240,000) / 2 = $250,000

Days Payable Outstanding = $250,000 * 365 / $750,000 = 121.67 days

Cash Conversion Cycle = Days Inventory Outstanding + Days Sales Outstanding - Days Payable Outstanding

Cash Conversion Cycle = 141.13 days + 96.73 days - 121.67 days

Cash Conversion Cycle = 116.19 days or 116 days

So, the correct option is D "116 days".