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Holly Manufacturing Corp
Holly Manufacturing Corp. has the following income statement and balance sheet information: Net Sales of $24,000,000; Cost of Goods Sold of $20,000,000; Accounts Receivable of $4,000,000; Inventory of $5,000,000; and Accounts Payable of $3,000,000. Rounded to the nearest day, what is the length of the company's cash cycle?
Expert Solution
Days in inventory=(Inventory/COGS)*365
=(5,000,000/20,000,000)*365
=91.25 days
Days in AR=(AR/Sales)*365
=(4,000,000/24,000,000)*365
=60.83 days(Approx)
Days in AP=(AP/COGS)*365
=(3,000,000/20,000,000)*365
=54.75 days
Cash cycle=Days in inventory+Days in AR-Days in AP
=91.25+60.83-54.75
=97 days(Approx)
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