On December 31, 2016, IZZY Corporation presents the following information in its financial statements From the Statement of Financial Position Cash Php 900 000 Accounts Receivables 1 400 000 Inventory 850 000 Prepaid Items 90 000 Accounts Payables 550 000 From the Statement of Comprehensive Income Sales Php 7 800 000 Cost of Sales 5 460 000 Operating Expenses 1 450 000 Financing Charges 150 000   REQUIRED: Compute the following 1

1) Inventory Conversion Period:

Inventory Conversion Period = 365/(Cost of Goods Sold/Inventory)

= 365/(5,460,000/850,000)

= 365/6.4235

Inventory Conversion Period = 56.82 days

2) Receivables Collection Period:

Receivables Collection Period = Accounts Receivable/(Annual Credit Sales/365)

= 1400000/(7800000/365)

= 1400000/21369.86

Receivables Collection Period = 65.51 days

3) Payable Deferral Period:

Payable Deferral Period = 365/(Cost of Goods Sold/Accounts payable)

= 365/(5460000/550,000)

= 365/9.93

Payable Deferral period = 36.77 days

4) Cash Conversion Cycle:

Cash Conversion Cycle = Inventory Conversion Period + Receivables Collection Period - Payable Deferral period 

= 56.82 days + 65.51 days - 36.77 days

Cash Conversion Cycle = 85.57 days