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West Chester Automation has an inventory turnover of 9
West Chester Automation has an inventory turnover of 9.1 and an accounts payable turnover of 10.6. The accounts receivable period is 32.8 days. What is the length of the cash cycle?
Note: Please show all work or write in complete sentences, if necessary. If you use the financial calculator to show your work, then please list the inputs you entered into the financial calculator.
Expert Solution
| days of inventory on hand = number of days in a year/inventory turnover |
| days of inventory on hand = 365/9.1 |
| days of inventory on hand = 40.11 |
| days of payables outstanding = number of days in a year/accounts payable turnover |
| days of payables outstanding = 365/10.6 |
| days of payables outstanding = 34.43 |
| Operating cycle = days of sales outstanding + days of inventory on hand |
| Operating cycle = 32.8+40.11 |
| Operating cycle = 72.91 |
| Cash conversion cycle = Operating cycle - days of payables outstanding |
| Cash cycle = 72.91-34.43 |
| Cash cycle = 38.48 |
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